You are offered an investment product that will give you $35,000 in 15 years, if the...

You are offered an investment product that will give you $35,000 in 15 years, if the opportunity cost of your investments is 3.2% how much would you be willing to pay for it?

If you have quarterly rate (periodic rate) and want to calculate an EAR (effective annual rate), is it a simple multiplication problem? T or F

If at the end of year three you start making deposits of $500 a month into an investment account and leave it there for 12 years, what will you have at the end of the invest horizon if the opportunity rate for your investments is 4%?

Your bank pays 4% continuous compounding. If you have $10,000 to invest how much will you have in 5 years?

Expert Solution

a)

Present value = Future value / (1 + r)^n

Present value = 35000 / (1 + 0.032)^15

Present value = 35000 / 1.603967

Present value = $21,820.90

You will be willing to pay $21,820.90.

jeff jeffy answered 2 years ago

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