Scott Schneider, CEO of Carolina, Inc., needs your help to better understand and

Question

Scott Schneider, CEO of Carolina, Inc., needs your help to better understand and solve some of the financial issues and tasks that Carolina is currently dealing with. See below. Carolina used to keep its excess cash with Fidelity Money Market fund. Over the last few years this fund has been posting an average return of 0.15% per month and you believe this performance pattern will continue into foreseeable future. Carolina invests into this account: 3,000,000 today; will add another 2,000,000 in 1 year and add another 3,000,000 in 2 years. How much will be in this account in 6 years? (Assume constant interest rate and no more additions/withdrawals).

Explanation / Answer

Average return per month=0.15% 0.0015 Investment today (Month 0) $3,000,000 Investment in 1 year (Month 12) $2,000,000 Investment in 2 years (Month 24) $3,000,000 6 years =6*12=72 months Future Value (FV) of cash flow at the end of 72 months: FV=(Cashflow)*((1+i)^(72-N)) i=monthly return=0.0015 N= month of cash flow N A FV=A*(1.0015^(72-N)) Month Cash Flow FV of cash flow 0 $3,000,000 3341872.804 12 $2,000,000 2188201.006 24 $3,000,000 3223792.117 SUM 8753865.927 Amount available in account after 6 years=Sum of FVs= $ 8,753,865.93

Related Questions

Navigate

• Browse (All)
• Browse S
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.