1.) A sum of $500,000 will be invested by a firm two years from now. If money is

Question

1.) A sum of $500,000 will be invested by a firm two years from now. If money is worth 12%, what will be the worth of this investment 10 years from now? A. $1,553,000 B. $1,569,000 C. $1,463,100 D. $1,238,000 2.) For the cash flow diagram below, determine the value of P 0 10 20 $3,000 i-10% A. $119.206 B. S195.49 C. $71 D. $147.20 3.) Ben invested $20,000 into a money market account and took out $5,000 at the end of year 5. He found out at the end of 10 years that he had a of S50,000 in the account. What is the annual interest rate Ben had earned on this investment? A. 8% 4.) The annual maintenance cost of a monument in the state capital is estimated to be $4850. A B. 12.93% C. 15.23% D. 11.5% peripheral fund of $100,000 is set up to pay for this maintenance expenditure. Determine the interest rate this fund earns if the interest is compounded quarterly. A. 4.58% B.4.76% C.4.39% D. None of these

Explanation / Answer

1)

Investment value after 10 years PV×(1+r)^n Here, 1 Interest rate per annum 12.00% 2 Number of years                                        8 3 Number of compoundings per per annum                                        1 1÷3 Interest rate per period ( r) 12.00% 2×3 Number of periods (n)                                        8 Present value (PV) $                      500,000 Investment value after 10 years $                   1,237,982 500000*(1+12%)^8 Select nearest option $1,238,000

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