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You currently have $10,000 in a bank account earning 5% interest. You think you will be able to deposit an additional $5,500 at the end
You currently have $10,000 in a bank account earning 5% interest. You think you will be able to deposit an additional $5,500 at the end of each for the next five years. How much will you have in five years? 2 marks
2. An investment in Fanta Bank offers to pay you $16,000 per year for the next 15 years if you invest $100,000 today and an investment in Yumzy Bank offers to $31,000 per year for the next 15 years if you invest $200,000, both investment will earn a rate of 13%. What is the net present value of each investment and which investment you choose? 3 marks
3. You are considering an investment that will pay you $6000 in one year, $5000 in two years, $4500 in three years and $7000 in fours years. If you want to earn 12.5% on your money, how much would you be willing to pay for the investment today and how much will the investment me worth in the fourth year (i.e what is the future value of the investment at the end of year 4)?
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