you have two options of investing $500. the first earns 5% interest compounded annually, and the...

you have two options of investing $500. the first earns 5% interest compounded annually, and the second earns 7% simple interest. Which option do you choose if you want to cash out the investment in 5 years? Why? Which option do you choose if you want to cash out the investment in 10 years? Why? Which option do you choose if you want to cash out the investment in 20 years? Why?

Expert Solution

jeff jeffy answered 2 years ago

You are comparing two investment options that each pay 6 percent interest, compounded annually. Both options...

You are comparing two investment options that each pay 6 percent interest, compounded annually. Both options will provide you with $12,000 of income. Option A pays $2,000 the first year followed by two annual payments of $5,000 each. Option B pays three annual payments of $4,000 each. Which one of the following statements is correct given these two investment options? Assume a positive discount rate. which option has a higer preswnr value? show the calculations of the present value for...

A deposit of $5,000 earns interest at 4% compounded semi-annually. After three-and-a-half years, the interest rate...

A deposit of $5,000 earns interest at 4% compounded semi-annually. After three-and-a-half years, the interest rate is changed to 4.5% compounded quarterly. How much is the account worth after 7 years? Jan is saving for a new bike that will cost $800. She has $500, which she has invested at 7% compounded semi-annually. How many years will it be (approximately) until she has $800? How long will it take for money to double if it is compounded quarterly at 6%?

you deposit $500 today in a savings account that pays 6% interest, compounded annually. How much...

you deposit $500 today in a savings account that pays 6% interest, compounded annually. How much will your account be worth at the end of 40 years?

If you invest $2,000 with a 4% interest rate compounded annually, how much will you have...

If you invest $2,000 with a 4% interest rate compounded annually, how much will you have in ten years? 2-If you are going to receive $2,000 in six years from now, how much is that worth today, assuming 5% annual simple interest? Which of the following options will generate the highest interest over the term, assuming the same $100 principal? Review Later 5% simple interest rate for 3 years 5% quarterly compounding for 3 years 5% monthly compounding for 2...

Suppose you have an opportunity to invest in a fund that pays 13% interest compounded annually....

Suppose you have an opportunity to invest in a fund that pays 13% interest compounded annually. Today, you invest $5,000 into this fund. Three years later (EOY 3), you borrow $2500 from a local bank at 10% annual interest and invest it in the fund. Two years later (EOY 5), you withdraw enough money from the fund to repay the bank loan and all interest due on it. Three years from this withdrawal (EOY 8) you start taking $1000 per...

You are saving $100 for two years with 10% interest rate (annually compounded). a. What is...

You are saving $100 for two years with 10% interest rate (annually compounded). a. What is FV at the end of year 2?(and show the equation) b. What is the interest earned on interest? (and show the equation)

You are investing $20,000 for 40 years at 5% annual compounded interest. Fill out a table that...

You are investing $20,000 for 40 years at 5% annual compounded interest. Fill out a table that shows the future value of your investment using various intervals of compounding: annual, quarterly, monthly, daily. Your work should be represented in the following table. Use normal rounding conventions and appropriate units. COMPOUNDING INTERVAL ANNUALLY QUARTERLY MONTHLY DAILY FORMULA USED FUTURE VALUE

Would you rather have a savings account that pays 5% compounded annually, or an account that...

Would you rather have a savings account that pays 5% compounded annually, or an account that pays 5% compounded monthly? Be sure to explain your position here.

If you deposit $82,000 in an interest bearing account that earns you 2.9% annual interest (compounded...

If you deposit $82,000 in an interest bearing account that earns you 2.9% annual interest (compounded annually) in the first 4 years, 2.1% annual interest (compounded annually) for the next 4 years and 7.7% annual interest (compounded annually) for the following 4 years, how much money will you have at the after these 3 interest periods?

You deposit $600 in an account earning 3% interest compounded annually. How much will you have...

You deposit $600 in an account earning 3% interest compounded annually. How much will you have in the account in 15 years?

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