Practice_Problems_1_Discounting - FIN 340 PRACTICE PROBLEM...

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FIN 340 PRACTICE PROBLEM SET 1 DISCOUNTING Answer all questions, then click on the Check Answers button at the end of the document. To solve this problem set, determine the best answer to each question and click on the appropriate button. Review any questions for which you gave an incorrect answer -- a few hints will be displayed in the Corrections box near the questions that were answered incorrectly. In a few days, there will be a detailed answer key (i.e., worked solutions in Excel) posted to Blackboard. 1. Upon graduation from The Olin School , you receive a $20,000 signing bonus from your new company, which you decide to invest for two years. Your investment advisor suggests two alternative strategies, which both require a commitment for the full two years. The first alternative will earn 10% per year for both years. The second alternative earns 12% for the first year, and 8% for the second year. Assume that interest compounds annually. Which alternative should you choose? It doesn't matter -- both strategies average 10% per year. 10% for two years is the better investment.
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This note was uploaded on 09/21/2009 for the course B 340 taught by Professor Narg during the Spring '09 term at Washington University in St. Louis.

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Practice_Problems_1_Discounting - FIN 340 PRACTICE PROBLEM...

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