Question 7 (1 point) Suppose you invest $50,000 at 8% interest for 7 years. How

Question

Question 7 (1 point)

Suppose you invest $50,000 at 8% interest for 7 years. How much money will you have after 7 years?

Question 7 options:

80,000

85,691.21

65,938.33

87,128.39

Question 8 (1 point)

Suppose you invest $5,000 at 1% interest for 20 years. How much money will you have after 20 years?

Question 8 options:

25,239.14

77,001.39

55,000

6,100.95

Question 9 (1 point)

What is the present value of $100,000 in 10 years, using a discount rate of 2%?

Question 9 options:

95,220.84

82,034.83

77,003.28

73,495.47

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Question 10 (1 point)

Suppose you could purchase an investment today that pays $1,000,000 in ten years. Using a discount rate of 4%, what is the maximum price you would want to pay for this investment today?

Question 10 options:

675,564

485,997

675,001

575,564

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Question 11 (1 point)

You are evaluating an investment that costs $50,000 today and pays $30,000 after one year and $30,000 after two years. Using a discount rate of 5%, what is the present value of this investment? (Take the present value of all the revenues and subtract the present value of all the costs). Is it a profitable investment?

Note that a negative number is indicated by the brackets " ( )".

Question 11 options:

The present value is ($5,302.11), and it is a profitable investment.

The present value is $55,782.31, and it is a profitable investment.

The present value is $5,782.31, and it is a profitable investment.

The present value is $55,782.31, and it is not a profitable investment.

80,000

85,691.21

65,938.33

87,128.39

Explanation / Answer

Answer to Question No 7: $ 85,691.21

50000* 1.087 = 50,000 * 1.713824269 = 85,691.21

Answer to Question No 8: $ 6,100.95

5,000 * 1.0120 = 5,000 * 1.22019004 = 6100.95

Answer to Question No 9: $ 82,034.83

100000*1/1.0210 = 100,000 * 0.8203483 = $ 82,034.83

Answer to Question No 10: $ 675,564

1,000,000 * 1/1.0410 = 1,000,000 * 0.675564 = $ 675,564

Answer to Question No 11: The present value is $5,782.31, and it is a profitable investment

-50,000 + 30,000/1.05 + 30,000 / 10.52 =

-50,000 + 28,571.42 + 27,210.88 = $ 5,782.3

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