RE Exam 2

FV register

A fixed (level) cash inflow or outflow (ex., monthly or annually) should be entered in the

9%

An investor originally paid $22,000 for a vacant lot 12 years ago. If the investor is able to sell the lot today for $63,000, what would be her annual rate of return (rounded to the nearest full percent)?

$132,665

Assume that a piece of land is currently valued at $50,000. If this piece of land is expected to appreciate at an annual rate of 5% per year for the next 20 years, how much will the land be worth at the end of 20 years?

132,665

Assume that a piece of land is currently valued at $50,000. If this piece of land is expected to appreciate at an annual rate of 5% per year for the next 20 years, how much will the land be worth at the end of 20 years?

$5,740,653.48

Ben Franklin invested 1,000 pounds (about $50,000 today) at the beginning of the year 1785. Assume the average annual return he earned from 1785 to the end of 1984 (200 years) was 2.4%. How much was Franklin's investment worth at the end of 1984? (Round your answer to the nearest cent).

Compounding

Calculation of the expected future value of a house in 5 years growing at an expected rate is called

$86,810.74

Equity Real Estate Investment Trusts are REITs that invest in and operate commercial properties. From 2000 to 2006, equity REITs delivered an average annualized return of 22.9%. John invested $5,000 in equity REITs at the beginning of every year from 2000 to 2006. How much was his investment worth at the end of 2006?

$18,564

Jenny wants to go to Europe four years from now. She can save $4,000 per year, beginning one year from today. She plans to invest the funds in the S&P 500 index fund that she thinks will return 10% per year. Under these conditions, how much will she have saved after she makes the 4th deposit, 4 years from now?

equal

Opportunity cost is the return the investor is forgoing on an alternative investment of ___________ risk in order to invest in the current opportunity.

36,278.87

The average annual return for the S&P 500 since its inception in 1928 through 2014 is approximately 10%. Assume a person invested $1.00 in the S&P 500 Index every year since the end of 1928. It would have grown into _____________ by the end of 2014.

3628.87

The average annual return for the S&P 500 since its inception in 1928 through 2014 is approximately 10%. assume a person invested $1.00 in S&P 500 Index in the end of 1928. It would have grown to __________ in the end of 2014.

increasing

The compounding of interest causes the value of an investment to grow at an ____________ rate

daily

The increase in the value of a one time (lump sum) investment that grows at a given rate will be greatest with __________ compounding

see

Timelines are useful because they allow us to ________ the time pattern of money returns.

FALSE

True or false: Theoretically, treasury bills (T-bills) are securities with a maturity less than 1 year. They are typically viewed as riskless securities, therefore the return on them should be zero

at least what you could earn on an alternative investment of equal risk

When you invest in a risky investment, you should expect to earn

34657

You want to buy a new sports car five years from now, and you plan to save $5,800 per year, beginning today. You will deposit your savings in an account that pays 6% interest. How much will you have in the account after making the 5th deposit, 5 years from now?