Question
Suppose you have the opportunity to invest in a fund that pays 12% interest compounded annually. Today, you invest $10,000 into this fund. Three years
Suppose you have the opportunity to invest in a fund that pays 12% interest compounded annually. Today, you invest $10,000 into this fund. Three years later (EOY 3), you borrow $5000 from a local bank at 10% annual interest and invest it in a fund. Two years later (EOY 5) you withdraw enough money from the fund to repay the bank load and all interest due on it. Three years from this withdrawal (EOY 8) you start taking $2,000 per year out of the fund. After five withdrawals of $2,000, you have withdrawn your original $10,000. The amount remaining in the fund is earned interest. How much remains?
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started