1. Which of the following comes closest to the value of investing $5,000 today f

Question

1. Which of the following comes closest to the value of investing $5,000 today for 5 years at the rate of 4% compounded monthly?

$ 6,744

$ 6,105

$ 5,808

$ 6,417

$ 7,088

2. What amount comes closest to the future value, at the end of year 20, of a 15 year annuity of $550 that makes its first payment at the end of year 6? Use an interest rate of 4%.

$ 13,821

$ 11,868

$ 11,013

$ 12,802

$ 10,229

3. An inheritance offers the amount of $100 in one year but then grows that amount by a constant rate of 4% forever. Which of the following comes closest to the present value of the inheritance if the bond’s required rate of return is 10%?

$ 2,500

$ 1,429

$ 1,667

$ 3,333

$ 2,000

$ 6,744

$ 6,105

$ 5,808

$ 6,417

$ 7,088

Explanation / Answer

Answer:1 b. 6105

=5000*(1+4%/12)^5*12

=6105

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