1. You invest $100,000 at 10% for 1 years. How much will you have? and how much

Question

1. You invest $100,000 at 10% for 1 years. How much will you have? and how much interest will you earn?

2. You want $300,000 in 10 years. If you can earn 10%, how much do you have to invest (one amount) today? and how much interest will you earn?

3. You want to invest a part of your $200,000 inheritage. You want to receive $10,000 a year each year for 20 years. How much do you have to invest now if you can negotiate a 6% return on your investment?

4. You want to invest a part of your $200,000 inheritage --$150,000. How much will you receive each year, for 20 years if you negotiate a 6% return on your investment?? How much of this is interest ?

Explanation / Answer

1.     You invest $100,000 at 10% for 1 years. How much will you have? and how much interest will you earn?

Ans: Principal invested $100,000, interest is ($100,000*.10) $10,000, amount to be received after 1 year is $ 110,000.

2.     You want $300,000 in 10 years. If you can earn 10%, how much do you have to invest (one amount) today? and how much interest will you earn?

Ans: Principal today to be invested ($300,000/2.853) $105,152.47. 2.853 is the discounting factor @10%. It has been assumed that the interest element will be reinvested.

3.     You want to invest a part of your $200,000 inheritage. You want to receive $10,000 a year each year for 20 years. How much do you have to invest now if you can negotiate a 6% return on your investment?

Ans: If $10,000 has to be earned every year and interest rate is 6%, principal required to be invested is $166,667. Hence $33,333 is the remained on hand.

4.     You want to invest a part of your $200,000 inheritage --$150,000. How much will you receive each year, for 20 years if you negotiate a 6% return on your investment?? How much of this is interest ?

Ans: Interest to be received is $150,000*0.06 ie $9,000

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