EXERCISE 3: PRESENT VALUES AND FUTURE VALUES Suppose you were offered the following options: a 10-year annuity of $10,000at the end of each year or a $60,000 lump-sum payment today. If you want to make 10%, which option would you prefer? Explain your decision

EXERCISE 3: PRESENT VALUES AND FUTURE VALUES Suppose you were offered the following options: a 10-year annuity of $10,000at the end of each year or a $60,000 lump-sum payment today. If you want to make 10%, which option would you prefer? Explain your decision

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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EXERCISE 3: PRESENT VALUES AND FUTURE VALUES
Suppose you were offered the following options: a 10-year annuity of $10,000 at the end
of each year or a $60,000 lump-sum payment today. If you want to make 10%, which
option would you prefer? Explain your decision

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Question 3) The following questions are related to Continuously Compounded Interest: If you invest $2,000 at an annual interest rate of 8% compounded continuously, calculate the final amount you will have in the account after 20 years. If you invest $10,000 at an annual interest rate of 5% compounded continuously, calculate the final amount you will have in the account after ten years. Question 4) Suppose you want to save $100,000 for a down payment on a house in 15 years. If your savings account earns 9% compounded monthly, how much would you need to deposit now to reach this goal?
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