Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

You are considering a 10 year investment plan in which your target is $150,000. There are two options available for you: Option 1: Putting exactly

You are considering a 10 year investment plan in which your target is $150,000. There are two options available for you:

Option 1: Putting exactly an equal amount of money into an investment fund at the end of each year for 10 years with the rate of return of 8%, annually compounding.

Option 2: Putting your initial investment of $50,000 in an asset that will pay you 9% rate of return, compounding quarterly for the first 6 years. The rate of return, compounding annually for the last 4 years (the period from year 7 to the end of year 10) has not been defined yet.

Required:

Calculate the amount of money you should put into your investment fund each year in Option 1?

Compute the effective annual interest rate (EAR) in the first 6 years in Option 2?

Compute the annually compounding rate of return you should target for your asset in the following 4 years to get $150, 000 at the end of year ten in Option 2?

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Sport Finance

Authors: Gil Fried, Steven Shapiro, Timothy D. Deschriver

2nd Edition

0736067701, 978-0736067706

More Books

Students also viewed these Finance questions

Question

b. Who is the program director?

Answered: 1 week ago

Question

How is workforce planning linked to strategic planning?

Answered: 1 week ago