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finance data bank




Question;Essay Questions;51. You want to deposit sufficient money;today into a savings account so that you will have $1,000 in the account three;years from today. Explain why you could deposit less money today if you could;earn 3.5 percent interest rather than 3 percent interest.;52. You are considering two separate;investments. Both investments pay 7 percent interest. Investment A pays simple;interest and Investment B pays compound interest. Which investment should you;choose, and why, if you plan on investing for a period of 5 years?;53. What lesson does the future value;formula provide for young workers who are looking ahead to retiring some day?;54. You are considering two lottery payment;options: Option A pays $10,000 today and Option B pays $20,000 at the end of;ten years. Assume you can earn 6 percent on your savings. Which option will you;choose if you base your decision on present values? Which option will you;choose if you base your decision on future values? Explain why your answers are;either the same or different.;55. At an interest rate of 10 percent and;using the Rule of 72, how long will it take to double the value of a lump sum;invested today? How long will it take after that until the account grows to;four times the initial investment? Given the power of compounding, shouldn't it;take less time for the money to double the second time?


Paper#51239 | Written in 18-Jul-2015

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