1.A family desires to have 300,000 available for a daughters college expenses in 20 years. If 8% can be earned on the invested capital, what is the starting amount today? a. $64,364 b. $100,916 c. $140,138 d. $150,448 2.One of the famous paintings of Claude Monet was sold in 2016 at auction for $2,000,000,000. If the original selling price in 1926 was the equivalent of $2,500, what is the return on investment (ROI) of this painting? a. 12.7%. b. 15.6%. c. 16.3%. d. 18.3%. 3.If $5,000 is invested today into a 4% account and it accumulates to $30,000, what is the number of years required, using logarithms. a. 31.5 years. b. 34.7 years. c. 40.6 years. d. 45.7 years. 4.If $20,000 is invested now in an account at Smithtown Mutual Fund, earning 6% annually, what is the total amount 25 years later? a. $81,033. b. $85,837. c. $68,705. d. $79,599.
Answer:-
(1). Future Value = 300,000
n = 20 years
Rate of Interest = 8%
Present Value = Future Value / (1 + 8%)^20
= 300,000 / (1.08)^20
= 300,000 / 4.661
= 64,363.87 or 64,364 approx.
(2). We need to use CAGR = (Ending value/Beginning value)^(1/no of years) - 1
= (2000000000 / 2500) ^ (1 / 90) - 1
= (800,000) ^ (1 / 90) - 1
= 1.163027 - 1
= 0.163027
= 16.30%
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