Question
Help with the following 2 questions please: 1. Your parents paid $1,000 for a college fund bond when you were born. Today is your 20th
Help with the following 2 questions please:
1. Your parents paid $1,000 for a college fund bond when you were born. Today is your 20th birthday and you are ready to cash the bond which has grown to a value of $3,361.85. What was the average annual rate of return on your college fund bond?
a. 5.50%
b. 6.25%
c. 6.73%
d. there is not enough information to answer this question
2. Michael received a professional baseball contract paying $7,000,000 per year for 5 years, Bert received a two-year contract for $16,000,000 per year. For purposes of calculations, treat these contracts as ordinary annuities. Who's contract has a greater present value if we assume a discount rate of 6%?
a. Bert = $29,334,283
b. Michael = $29,486,547
c. Bert = $39,459651
d. Michael = $39, 743,196
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