S. An amount $4,000 is invested today and another $10,000 invested four years fr
ID: 2409564 • Letter: S
Question
S. An amount $4,000 is invested today and another $10,000 invested four years from now, If both of the earn a simple interest of 10%, the interest accrued at the end of 5 years is Si,400 True/False 16. IfSonja invested $10,000 in a good mutual fund that pays an average return or i0%the investment will be worth S1610 five years from now True or False 17. It is customary in engineering economic analysis to assume that the stated interest rate is for a one-year period. True or False 18. When there are different repayment plans available to repay a loan, the plans are all equivalent as long as the interest rates are different as each payment plan results in a different total repayment True or False Chapter 4- Equivalence for Repeated Cash Flows 19. An "annuity" is defined as: A) Earned interest due at the end of each interest period. Amount of interest earned by a unit of principal in a unit of time C) B) A series of equal cash flows occurring at equal periods of time. All of the above. D) 20. A set of cash flows are given in table below, using the principles of equivalence, determine the value "Y" for an interest rate of 8% compounded annually. Page 2Explanation / Answer
Since, multiple questions have been posted, I have answered the first 2 (15 and 16).
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Question 15
The statement is "False".
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Explanation:
The value of simple interest earned on the initial $4,000 at 10% simple interest rate for 5 years is calculated as below:
Simple Interest on $4,000 for 5 Years = 4,000*10%*5 = $2,000
The amount of simple interest on the next investment of $10,000 at 10% simple interest rate for two years is determined as below:
Simple Interest on $10,000 for 2 Years = 10,000*10%*2 = $2,000
The total amount of simple interest accrued at the end of 5 years will be $4,000 (2,000 + 2,000). Therefore, the statement is false.
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Question 16
The statement is "False".
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Explanation:
The future value of $10,000 at 10% rate of return is calculated as below:
Future Value of $10,000 at 5 Years from Now = Amount Invested*(1+Average Rate of Return)^Years = 10,000*(1+10%)^5 = $16,105.10
The future value will be $16,105.10 and not $16,110. Therefore, the statement is incorrect/false.
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