1. 2 year(s) ago, Priya invested 22,087 dollars. She has earned and will earn co
ID: 2811083 • Letter: 1
Question
1. 2 year(s) ago, Priya invested 22,087 dollars. She has earned and will earn compound interest of 7.99 percent per year. In 3 year(s) from today, Vince can make an investment and earn simple interest of 14.68 percent per year. If Vince wants to have as much in 6 years from today as Priya will have in 6 years from today, then how much should Vince invest in 3 year(s) from today?
2. For each of the 4 investments described in the table, the investor would pay 2,500 dollars today to purchase the investment. Each investment would have the annual return noted in the table and each investment would make a single, lump sum payment to the investor in the number of years from today noted in the table. If RD > RC and TL > TP, then which assertion is true? All annual returns and numbers of years from today when the single, lump sum payment will be made are greater than zero.
Investment
Annual return
Number of years from today when the single, lump sum payment will be made
C
RC
T
D
RD
T
L
R
TL
P
R
TP
Investment D will make a larger single, lump sum payment in T years than investment C will make in T years, and investment P will make a larger single, lump sum payment in TP years than investment L will make in TL years
Investment C will make a larger single, lump sum payment in T years than investment D will make in T years, and investment L will make a larger single, lump sum payment in TL years than investment P will make in TP years
Investment C will make a larger single, lump sum payment in T years than investment D will make in T years, and investment P will make a larger single, lump sum payment in TP years than investment L will make in TL years
Investment
Annual return
Number of years from today when the single, lump sum payment will be made
C
RC
T
D
RD
T
L
R
TL
P
R
TP
Explanation / Answer
1)
amount invested by Priya , A = $22,087
interest earned on A = r = 7.99% = 0.0799
amount earned in 8 years by Priya on her investment, M = A*(1+r)8 = 22087*(1.0799)8 = 40,851.22278
this is the amount Vince needs 6 years from today
simple interest earned by Vince , i = 14.68% = 0.1468
time for which the amount will be invested by Vince = t = 3 years
let the amount invested by Vince 3 years from today = X
M = X*(1+(i*t)) = X*(1+(0.1468*3))
40,851.22278 = X*(1+(0.1468*3))
40,851.22278 = X*(1+0.4404) = X*1.4404
X = 40,851.22278/1.4404 = 28,361.02665 or $28,361.03 ( rounding off to 2 decimal places)
Vince should invest in 3 year(s) from today an amount = X = $28,361.02665 or $28,361.03
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