(L. OBJ. 3) Using the time value of money to compute the present and future values of single lump sums and annuities [15—20 min]
Your best friend just received a gift of $6,000 from his favorite aunt. He wants to save the money to use as “starter” money after college. He can invest it (1) risk-free at 4%, (2) taking on moderate risk at 10%, or (3) taking on high risk at 16%.
Requirement
1. Help your friend project the investment’s worth at the end of four years under each investment strategy and explain the results to him.
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