Question

Mathemitcs of finance

following learning outcomes:

• Time value for money and the rate of return
• Assess the simple interest and compound interest
• Net Present value in Capital Budgeting (Internal rate of return, Payback period)

Clearly identifying all steps, results, and including comments besides each answer.

You have saved 120,000€ and you want to know what is the better option for your money,

1. It is better to spend the money today or invested and receive 122,000 in 3 years with annual simple interest rate of 10%?

(20 points)

2. The bank offers you some options, however, you can't withdraw it for 5 years:
   1. 8% simple interest (10 points)
   2. 6% compounded semi-annual (10 points)
   3. 5.5% compounded monthly (10 points)

    Which is the best option of the bank?

3. How long will it take to your money to earn 2000€ at a rate of 12% simple interest rate? (15 points)
4. If you want to invest only one part of your money, what amount of money will be necessary to accumulate 60,000€ in 6 months at a 9% simple interest rate? (10 points)

Answer 1