Q5 | Future value of option 1 | $11,040.20 | |||
Future value of option 2 | $11,304.92 | ||||
Option 2 gives higher returns | |||||
Difference in returns | $264.72 | ||||
Q6 | Options | 10000 now | 20000 after 10 years | 30000 after 20 years | Preference |
PV at 6% rate | $10,000.00 | $11,167.90 | $9,354.14 | 20000 after 10 years | |
PV at 8% rate | $10,000.00 | $9,263.87 | $6,436.45 | 10000 now | |
PV at 10% rate | $10,000.00 | $7,710.87 | $4,459.31 | 10000 now | |
Q7 | PV of the note | $2,598.83 | |||
Cost of the Note | 2700 | ||||
Hence do not buy the note |
Workings
5. You have two opportunities to invest $5,000 for 10 years. The first provides a yield...
8.3-8.6. Using the Finance Formulas potage 2 of 21 15. Suppose you invest $5,000 in a savings account that pays an annual interest rate of 4%. If the interest is compounded monthly, what is the balance in the account after 10 years? 16. You invest $5000 at 2.2% annual interest compounded quarterly. How much do you have after 5 years? 17. Against expert advice, you begin your retirement savings at age 40. You plan on retiring at age 65. How...
Suppose you invest $5,000 for 5 years. The interest rate for the first 2 years is 4.7%, 5.2% for year 3 and 5.4% for the final 2 years. Assuming interest compounds annually, what would your investment have returned in those 5 years?
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Patricia wants to invest a sum of money today that will yield $17,000 at the end of 6 years. Assuming she can earn an interest rate of 6% compounded annually, how much must she invest today?
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