Cash flows year a b c 1 500 1500 2500 2 560 1550 2600

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Unformatted text preview: stment choice Clare Jaccard has $5,000 to invest. Because she is only 25 years old, she is not concerned about the length of the investment’s life. What she is sensitive to is the rate of return she will earn on the investment. With the help of her financial advisor, Clare has isolated the four equally risky investments, each providing a single amount at the end of its life, as shown in the following table. All of the investments require an initial $5,000 payment. Investment Single amount Investment life (years) A $ 8,400 6 B 15,900 15 C 7,600 4 D 13,000 10 CHAPTER 4 Time Value of Money 185 a. Calculate, to the nearest 1%, the rate of return on each of the four investments available to Clare. b. Which investment would you recommend to Clare, given her goal of maximizing the rate of return? LG6 4–49 Rate of return—Annuity What is the rate of return on an investment of $10,606 if the company will receive $2,000 each year for the next 10 years? LG6 4–50 Choosing the best annuity Raina Herzig w...
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This document was uploaded on 03/03/2014 for the course MBA BMMF at Open University Malaysia.

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