{[ promptMessage ]}

Bookmark it

{[ promptMessage ]}

Lecture 2- Ch.4 In class problems

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

This preview shows pages 1–2. Sign up to view the full content.

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? 2A. What is the present value of your trust fund if it promises to pay you \$50,000 on your 30 th birthday (& years from today) if the account earns 10% compounded annually? 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? 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?

This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document
This is the end of the preview. Sign up to access the rest of the document.

{[ snackBarMessage ]}