22. 500 points value: Investments in the stock market have increased at an avera

Question

22. 500 points value: Investments in the stock market have increased at an average compound rate of about 5% since 1909. It is now 2013. a. If you invested $1,000 in the stock market in 1909, how much would that investment be worth today? Do not round intermediate calculations. Round your answer to 2 decimal places.) Investment b. If your investment in 1909 has grown to $1 million, how much did you invest in 1909? (Do not round intermediate calculations. Round your answer to 2 decimal places.) sent value References eBook &Resources; Learning Objective: 05-0 invested at a particular i Worksheet Difficulty: Basic FINA 307 Ch5 The pptx

Explanation / Answer

Requirement (a) – Investment = $159,840.60

Investment = Invested Amount x Future Value Factor

= $1,000 x [FVF 5%, 104 Period]

= $1,000 x 159.8406008

= $159,840.60

Requirement (b) – Present Value = $6,256.23

Future Value = Present Value x Future Value Factor

$10,00,000 = Present Value x [FVF 5%, 104 Period]

$10,00,000 = Present Value x 159.8406008

Present Value = $10,00,000 / 159.8406008

Present Value = $6,256.23

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