Chapter 5 Review Worksheet If you deposit $10,000 in a bank account paying 10.38%, how much will you have in one year? If you need $12,000 in one year, how much do you have to deposit today? 1. 2. An art collector has the opportunity to invest in paintings: the investment requires an initial outlay of $2 million today. The collector is certain that he will be able to sell the paintings for $2.18 million one year from now. He also has the opportunity to invest in bank certificates of deposit which pay 10% per year, what is the future value of the $2MM if the collector elects to purchase a bank CD? Is the investment in paintings a good idea? 3. In problem 2, what is the rate of return for the investment in paintings? 4. As a newly-minted MBA embarking on a career in investment banking, you must own a new car immediately. The car costs $28,320. You also have to spend $3,248 on new suits for work. Your salary this year is $42,000, and next year it will be $46,000. Your routine living expenses this year will be $34,000. You plan to make up the difference between current income and current consumption by borrowing; the interest rate for the loan is 14% and you intend to repay the loan, plus interest in one year. How much will you have left to spend next year