Question
5) An assembly plant anticipates needing to replace some of its machinery in 4 years, at a current cost of $2 million. The company expects
5) An assembly plant anticipates needing to replace some of its machinery in 4 years, at a current cost of $2 million. The company expects annual inflation of 3%. It also believes it can earn an 8% return on its money, compounded quarterly. How much money would the company have to put into an account now in order to have the anticipated future cost of the machinery available to withdraw at the end of 4 years?
6) (10%) What is the future value of $80,000 invested now for 5 years at a 6% rate under the following compounding options? A. Annual B. Semi-annual 2 NOT FOR DISTRIBUTION OR SHARING OUTSIDE OF THIS COURSE C. Quarterly D. Monthly
7) (10%) For each of the 4 compounding options in question 6, calculate the Effective Annual Rate.
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