Finance ch. 5 - compounding(3 A payment scheme of 8...

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17. How much would $1, growing at 5% per year, be worth after 100 years? A) $131.50 B) $164.52 C) $155.94 D) $141.05 E) $144.50 Points Earned: 5.0/5.0 Correct Answer(s): A 18. A financial planner has offered you three possible options for receiving cash flows. You must choose the option that has the highest present value. (1) $1,000 now and another $1,000 at the beginning of each of the 11 subsequent months during the remainder of the year, to be deposited in an account paying a 12% nominal annual rate, but compounded monthly (to be left on deposit for the year). (2) $12,750 at the end of the year (assume a 12% nominal interest rate with semiannual
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Unformatted text preview: compounding). (3) A payment scheme of 8 quarterly payments made over the next two years. The first payment of $800 is to be made at the end of the current quarter. Payments will increase by 20% each quarter. The money is to be deposited in an account paying a 12% nominal annual rate, but compounded quarterly (to be left on deposit for the entire 2-year period). Which one would you choose? A) Choice 1 B) Choice 2 C) Choice 3 D) Neither one, since they all have negative present values. E) Either one, since they all have the same present value. Points Earned: 2.5/5.0 Correct Answer(s): A...
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