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1. You expect to receive $4,400 upon your graduation and will invest your windfall at an...

1. You expect to receive $4,400 upon your graduation and will invest your windfall at an interest rate of 0.69 percent per quarter until the account is worth $5,725. How many years do you have to wait until you reach your target account value?

2. McCann Co. has identified an investment project with the following cash flows. Year. Cash Flow 1. $950 2. 1,050 3. 1,330 4. 1,160 a. If the discount rate is 8 percent, what is the present value of these cash flows? b. What is the present value at 19 percent? c. What is the present value at 26 percent?

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Expert Solution

Question 1:

PV = Amount received = $4,400

FV = future value = $5,725

r = quarterly interest rate = 0.69%

n = number of quarters

FV = PV * (1+r)^n

$5,725 = $4,400 * (1+0.69%)^n

(1.0069)^n = 1.301136364

n = log(1.301136364) / log(1.0069)

n = 0.114322815 / 0.00298634086

n = 38.2819043 quarteres

Therefore, it will take 9.57 years to reach the sum $5,725

Question 2:

jeff jeffy answered 2 years ago
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