Lecture 2- Ch.4 In class problems

Lecture 2- Ch.4 In class problems - Lecture 2 Ch.4 In-class...

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Lecture 2 – Ch.4 In-class Problems 1. How much interest is earned in the fifth year on a $1,000 deposit that earns 8% interest compounded annually? A) $ 89.44 B) $ 95.14 C) $108.84 D) $117.54 2A. What is the present value of your trust fund if it promises to pay you $50,000 on your 30 th A) $25,000 B) $25,658 C) $28,224 D) $29,412 2B. You are offered an investment opportunity with the “guarantee” that your investment will double in 5 years. Assuming annual compounding, what annual rate of return would this investment provide? A) 14.87 % B) 12.25 % C) 18.74 % D) 100 % 3. A cash-strapped young man offers to buy your car with four, equal end-of-year payments of $3,000, beginning three years from today. Assuming that you are indifferent to cash versus credit, that you can invest at 10% annually, and that you want to receive $8,000 for the car, should you accept his offer? A) Yes; present value is $8,645.
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This note was uploaded on 06/04/2011 for the course ADMS 3530 taught by Professor Unknown during the Summer '09 term at York University.

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Lecture 2- Ch.4 In class problems - Lecture 2 Ch.4 In-class...

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