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In: Finance

C. In 1790 Benjamin Franklin left the equivalent of $4,600 (actually 1,000 British pounds) each to...

C. In 1790 Benjamin Franklin left the equivalent of $4,600 (actually 1,000 British pounds)

each to the cities of Philadelphia and Boston. He stipulated that the money be invested

and that the principal not be touched for 100 years.

  1. If the money had been invested at 4%, compounded yearly, how much would each city have had in 1890?  _____________________

  2. How much if it had been invested at 5%, compounded yearly? __________________


D. A genie popped out of a bottle and offered you one of three choices:

  1. $5,000 today.

  2. $10,000 10 years from now.

  3. a 12-year annuity, paying $1,000 a year starting at the end of this year.

Your required rate of return is 9%. Which alternative is worth more to you?_____________________

Solutions

Expert Solution

Please refer to below spreadsheet for calculation and answer. Cell reference also provided.

Cell reference -

jeff jeffy answered 2 hours ago
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