Question

Part 2, Short Answer, 8 points, 2 points each Answer "A" or "B" or "AB" for each of the following. Put your answer in the column to the rig NO CALCULATIONS NEEDED. 14.Investor A deposits S20 per month for 5 vears Investor B deposits 5240 per year for 5 years. W deposits $240 per year for 5 years. Which investor will e have more money at the end of 5 years? 15. Investments A and B have cash flows of $100 per month. Investment A is an annuity due and Investment ordinary annuity. All else equal, which do you prefer? 16.A and B made investments into an account 5 years ago. Now both accounts are worth $20.000. A earned 5.B earned 7%. Who made the bigger deposit? 17. A and B made investments of $2000 into an account 6 years ago. A's account is now worth $3200. B's account is now worth $3500. Who earned the higher interest rate? Bonus - 6 points, all or nothing. No partial credit. You will only receive credit if you answer correctly.

Answer 1

Answer:

14. B

If investor B deposits at the beginning of the year , then investor B will have more money at the end of 5 years .

Otherwise Investor A will have more money at the end of 5 years.

15. A

Since investment A is an annuity due , it is Preferable.

16. A

In this case both A and B made investment into an account 5 years ago and now the account worth's same .Therefore those who earned lower rate of interest have made the bigger deposit . Hence A made the bigger deposit.

17.B

In this case B has earned the higher rate of interest , since B's account worth is more than A 's account worth.