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AQR Unit 2
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Journalist questions
1. Janice needs to write an essay on the history of the New York Stock Exchange. She decides to first answer the questions of who, what, where, when, why, and how. Which prewriting strategy did Janice use?
Brainstorming
2. Jessica needs to write an essay on the costs of vegetarian diets. She decides to list as many
vegetables as she can in a short period of time. Which prewriting strategy did Janice use?
$2,959.07
3. Katelyn invested $2325 in a savings account that earns 3.45% interest compounded monthly. What will the account be worth in 7 years?
$51,841.12
4. Martin wants to purchase a home in six years. He will contribute $650 each month to a savings account with 3.51% interest, compounded quarterly. What is the future value of this investment, when Maurice needs to make a down payment?
$14,012.75
5. Jennifer wants to take a trip around the world. She plans to deposit $125 at the beginning of each month into an investment with a 3.75% interest rate, compounded monthly. How much will she have in the account after 8 years?
$10,920.91
6. Martin needs $15,900 to purchase a boat. How much money will he need to invest today in a savings account earning 2.9% interest, compounding quarterly, to have enough money to purchase the boat in 13 years?
$8,623.98
7. Every six months, Jessa deposits $525 into an interest-bearing account to save for her children's tuition. The interest rate on the account is 5.4% compounding semiannually. What is the present value of the investment if Jessa's children leave for college in 11 years?
$39,384.13
8. George has an annuity that pays $1,250 at the beginning of each quarter. If the economy grows
at a rate of 3.49% annually, what is the value of the annuity if he received it in a lump sum now rather than over a period of nine years?
5.44%
9. Use the table to answer the question that follows. (Table saved as PDF)
Last year, Ralph purchased 60 shares of Zycodec at its lowest price of the year and purchased
75 shares of Unix at its highest price of the year. If Ralph sold all shares of both stocks today
at their respective closing prices, what was his overall rate of return?
Stock C
10. When she turned 25, Rachael purchased 135 shares of Stock A for $55 per share; 37 shares of Stock B for $33 per share; 37 shares of Stock C for $54 per share; and 145 shares of Stock D for $22 per share. At age 38, Rachael sold Stock A for $7440 with annual dividends of $95 per year, Stock B for $1342, Stock C for $2787, and Stock D for $3906. Which stock provided Reese with the greatest return on her investment?
10.80%
11. Use the table to answer the question that follows.(Table saved as PDF)
Suppose you purchased 65 shares of Unix stock on Day 1 at the closing price. What is the return on your investment, if you sold the stock on Day 5 at the closing price?
Savings account
12. Jane is a 15 year old female who earned $1,200 one summer babysitting. She will use the money for a ski trip this winter. She cannot afford to lose any of it. Which is the best investment choice for Jane?
Stock A and Stock B
13. Last year, Sonya purchased 72 shares of Stock A at $35 per share, 36 shares of Stock B at $63
per share, and a three year $2500 bond with a 7.96% coupon for $2250. Sonya sold both
stocks today. Stock A is worth $43 per share and Stock B has a value of $77.40 per share.
Assuming neither stock paid a dividend, which investment has the highest rate of return
$117.15
14. Use the table to answer the question that follows.
(Table saved as PDF)
Leah's income put her in the fifth tax bracket (33%) last year. During that year, she earned $125 in dividends and $225 in coupons on a corporate bond. Five years ago, she purchased a common stock for $225. She sold the same stock last year for $386. What is the total Leah will pay in taxes on last year's investments?
3.06%
15. Ryan's investment portfolio is shown below.
(Table saved as PDF)
What is his weighted mean ROR?
Portfolio 1, Portfolio 2, Portfolio 3
16. Use the table to answer the question that follows.
(Table saved as PDF)
Calculate the weighted mean of the RORs for each portfolio. Based on the results, which list shows a comparison of the overall performance of the portfolios, from best to worst?
Weighted Mean: 1.31%; Mean: 1.43%; Median: 2.1%
17. An investment portfolio is shown below.
(Table saved as PDF)
What is the weighted mean, mean, and median overall rate of return on this investment portfolio?
$1,017.31
1. Payton bought a 15 year treasury bond for a face amount of $700. The 2.5% interest will be
compounded quarterly. What will the future value of Patrick's investment be when he goes to cash it in on the maturity date 15 years from now?
$26,150.60
2. Jerry deposits $5,000 at the end of each year in an account earning 2.25% interest, compounded annually. What is the future value of this annuity after 5 years of investing?
$191,398.49
3. Ricky is 24 years old and starting an IRA (individual retirement account). He is going to invest $200 at the beginning of each month. The account is expected to earn 2.95% interest, compounded monthly. How much money will Ricky have in his IRA when he retires, at age
65?
$23,884.84
4. Gretchen starts to save at age 20 for an extended vacation around the world that she will take on her 40th birthday. She will contribute $1000 each year to the account, which earns 1.75% annual interest, compounded quarterly. What is the future value of this investment when she takes her trip?
$8,299.60
5. Eliot opens a savings account with $5,000. He deposits $50 every month into the account that
compounds annually and has a 0.95% interest rate. What will his account total be in 5 years?
$34,349.00
1. Missy knows that she needs $40,000 for a down payment on a house. She found an investment that earns 3.05% interest compounding monthly. She would like to purchase the home in 5 years. How much should she put in the account now to ensure she has her down payment?
$11,146.37
2. John is saving up for a down payment on a car. He plans to invest $2,000 at the end of every year for 6 years. If the interest rate on the account is 2.15% compounding annually, what is the present value of the investment?
39.7%
3. Olivia is 18 and would like to buy a house when she is 30. What is the discount factor for today's prices if the housing values increase 8% per year?
$85,047.46
4. Billy has an annuity that pays him $9800 at the beginning of each year. Assume the economy will grow at a rate of 3.3% annually. What is the value of the annuity if he received it now instead of over a period of 10 years?
Annuity: by $7,707.19
5. Rehan has been awarded some money in a settlement. He has the option to take a lump sum payment of $170,000 or get paid an annuity of $1,000 per month for the next 20 years. Which payment of $170,000 or get paid an annuity of $1,000 per month for the next 20 years. Which is the better deal for Rehan, and by how much, assuming the growth rate of the economy is 3.05% per year?
$35,876.45
1. How much of an initial investment is needed in order to have $37,725 in 2 years with an account that has a 2.52% yield and compounds quarterly? Round the solution to the nearest cent.
$62,614.83
2. What is the present value of a monthly 21-year investment of $417 at a rate of 5.43% compounding monthly? Round your answer to the nearest cent.
$35,876.45
5. How much of an initial investment is needed in order to have $37,725 in 2 years with an account that has a 2.52% yield and compounds quarterly? Round the solution to the nearest cent.
$11,875.38
6. Regular $168 payments are made at the beginning of each quarter to a 28-year annuity earning 3.64% annual interest, compounded quarterly. What is the present value of the annuity? Round your answer to the nearest cent.
$5,213.01
7. Regular $319 payments are made at the beginning of each year to a 21-year annuity earning 2.67% annual interest, compounded annually. What is the present value of the annuity? Round your answer to the nearest cent.
$1,594.23
8. How much of an initial investment is needed in order to have $5,937 in 25 years with an account that has a 5.4% yield and compounds annually? Round the solution to the nearest cent.
$21,144.35
9. What is the present value of a monthly 33-year investment of $97 at a rate of 4.06% compounding monthly? Round your answer to the nearest cent.
$2,100
1. Ashley purchased a 10-year $3,000 bond at par value with a 7% coupon. What is the total value of the
coupons?
11.43%
2. What is the rate of return on a $10,000 bond purchased at $8750 with a 10% coupon?
Stock A and Stock B
3. Last year, Zachary purchased 40 shares of Stock A at $80 per share, 80 shares of Stock B at $160 per share, and a $750 bond with a 5.25% coupon for $775. Zachary sold both stocks today. Stock A is worth $83 per share and Stock B has a value of $166 per share. Assuming neither stock paid a dividend, which
investment has the lowest rate of return?
Preferred stock, common stock, municipal bond
4. List the following stocks and bonds in order from highest default risk to lowest default risk:
*A municipal bond in a city with a population of 100,000
*A common stock in a 77-year old firm with good business practices
*A preferred stock in a company under federal investigation
$89.25
5. Use the table to answer the question that follows.
Alonzo's income put him in the third tax bracket (25%) last year. During the same year, he earned $325 in
dividends and $100 in coupons on a municipal bond. Five years ago, he purchased a common stock for $275. He sold the same stock last year for $545. What is the total Alonzo will pay in taxes on last year's investments?
Brainstorming
1. Julia needs to write an essay on how she spends her money on a daily basis. She decides to list as many
daily tasks as she can in a short period of time. Which prewriting strategy did Janice use?
Journalist questions allow you to compare two topics.
2. Which statement about journalist questions is false?
$1,535.13
3. Katherine invested $1225 in a savings account which earns 3.25% interest compounded semiannually.
What will the account be worth in 7 years?
$31,574.30
4. Miles wants to purchase a home in six years. He will contribute $5000 each year to a savings account with 1.85% interest, compounded semiannually. What is the future value of this investment, when Maurice needs to make a down payment?
$30,853.33
5. Julianne wants to take a trip around the world. She plans to deposit $175 at the beginning of each month into an investment with a 3.25% interest rate, compounded monthly. How much will she have in the account after 12 years?
$17,754.46
6. Miguel needs $34,100 to purchase a boat. How much money will he need to invest today in a savings account earning 4.1% interest, compounding quarterly, to have enough money to purchase the boat in 16 years?
$7,138.46
7. Every six months, Juanita deposits $500 into an interest-bearing account to save for her children's tuition. The interest rate on the account is 6.9% compounding semiannually. What is the present value
of the investment if Juanita's children leave for college in 10 years?
$39,384.13
8. George has an annuity that pays $1,250 at the beginning of each quarter. If the economy grows at a rate of 3.49% annually, what is the value of the annuity if he received it in a lump sum now rather than over a
period of nine years?
9.63%
9. Use the table to answer the question that follows.
Last year, Robert purchased 70 shares of Zycodec at its lowest price of the year and purchased 65 shares
of Unix at its highest price of the year. If Robert sold all shares of both stocks today at their respective
closing prices, what was his overall rate of return?
Stock A
10. When she turned 22, Rae purchased 145 shares of Stock A for $25 per share; 87 shares of Stock B for $38
per share; 46 shares of Stock C for $87 per share; and 115 shares of Stock D for $25 per share. At age 32, Rae sold Stock A for $3740 with annual dividends of $80 per year, Stock B for $3852, Stock C for $3950, and Stock D for $3225. Which stock provided Reese with the greatest return on her investment?
17.82%
11. Use the table to answer the question that follows.
Suppose you purchased 80 shares of Unix stock on Day 1 at the closing price. What is the return on your
investment, if you sold the stock on Day 5 at the closing price?
Preferred Stock
12. Robert and Ellie are new homeowners who have recently welcomed their first child. Both have stable
employment with a decent income. They would like to invest the money they received from the baby shower for their child's education. Their hope is that the investment will increase in value while also providing a little extra income regularly. Which is the best investment choice for Robert and Ellie?
Bond
13. Last year, Shelia purchased 45 shares of Stock A at $45 per share, 56 shares of Stock B at $51 per share,
and a three-year $4500 bond with a 6.76% coupon for $3200. Sheila sold both stocks today. Stock A is worth $48 per share and Stock B has a value of $55 per share. Assuming neither stock paid a dividend, which investment has the highest rate of return?
$61.05
14. Use the table to answer the question that follows.
Lexie's income put her in the third tax bracket (25%) last year. During that year, she earned $250 in dividends and $325 in coupons on a municipal bond. Five years ago, she purchased a common stock for $475. She sold the same stock last year for $632. What is the total Lexie will pay in taxes on last year's investments?
2.08%
15. Ryan's investment portfolio is shown below.
What is his weighted mean ROR?
Portfolio 2, Portfolio 3, Portfolio 1
16. Use the table to answer the question that follows.
Calculate the weighted mean of the RORs for each portfolio. Based on the results, which list shows a
comparison of the overall performance of the portfolios, from best to worst?
Weighted Mean: 1.31%; Mean: 1.43%; Median: 2.1%
17. An investment portfolio is shown below.
What is the weighted mean, mean, and median overall rate of return on this investment portfolio?
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