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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expected
Transcribed Image Text:All other factors being equal, both the simple interest and the compound interest methods will accrue the same amount of
earned interest by the end of the first year.
Yuri is willing to invest $30,000 for six years, and is an economically rational investor. He has identified three investment alternatives (X, Y, and Z)
that vary in their method of calculating interest and in the annual interest rate offered. Since he can only make one investment during the six-year
investment period, complete the following table and indicate whether Yuri should invest in each of the investments.
Note: When calculating each investment's future value, assume that all interest is earned annually. The final value should be rounded to the nearest
whole dollar.
Investment
Interest Rate and Method
Expected Future Value
Make this investment?
11% compound interest
13% compound interest
13% simple interest
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3.141593
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10
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ETA
Notes
BACK OFFICE REQ
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