02
a) Why is wealth maximization considered as a better measure than profit maximization?
b) You are going to deposit in saving account Tk. 3,00,000 today. You will receive Tk.
4,80,000 from the bank at the end of year 7. What will be the rate of interest of your
deposit?
c) Mr. Kobir has been offered to deposit of Tk. 10000 today with an interest rate of 12%.
Calculate the value on this opportunity after 5 years, if the interest rate is:
(i) Compounded Semi-Annually.
(ii) Compounded Monthly.
d) Gabrielle just won Tk. 10,00,000 in the state lottery. She is given the option of receiving
either alternative A or B shown in the following table at the end of each of the next 5
years. She decides to choose the payment alternative—
payments— that provides the higher
earn 5% annually on her investments, which option should she take?
End of year Cash flow stream
Alternative A Alternative B
1 2,00,000 3,00,000
2 2,00,000 2,50,000
3 2,00,000 2,00,000
4 2,00,000 1,50,000
5 2,00,000 1,00,000
Totals 10,00,000 10,00,000
![Q.02
[3+1.5+1.5+4]
a) Why is wealth maximization considered as a better measure than profit maximization?
b) You are going to deposit in saving account Tk. 3,00,000 today. You will receive Tk.
4,80,000 from the bank at the end of year 7. What will be the rate of interest of your
deposit?
c) Mr. Kobir has been offered to deposit of Tk. 10000 today with an interest rate of 12%.
Calculate the value on this opportunity after 5 years, if the interest rate is:
(i)
Compounded Semi-Annually.
(ii) Compounded Monthly.
d) Gabrielle just won Tk. 10,00,000 in the state lottery. She is given the option of receiving
either alternative A or B shown in the following table at the end of each of the next 5
years. She decides to choose the payment alternative annuity or the mixed stream of
payments- that provides the higher future value at the end of 5 years. If Gabrielle can
earn 5% annually on her investments, which option should she take?
End of year
Cash flow stream
Alternative A
Alternative B
1
2,00,000
3,00,000
2
2,00,000
2,50,000
3
2,00,000
2,00,000
4
2,00,000
1,50,000
2,00,000
1,00,000
Totals
10,00,000
10,00,000](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F0a5d6b4a-c69d-4bde-a4ce-e173fe40613a%2F36bc5e28-5564-48be-985a-a5fc8c12553c%2F4qkx7_processed.jpeg&w=3840&q=75)
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