Yani has $12,000 for investment purposes. His bank has offered the following three choices: Choice 1. Aspecial savings certificate that will pay $180 each month for 5 years and a lump sum payment at the end of 5 years of $13,000 Choice 2. Buy a share of a racehorse for $12,000 that will be worth $24,000 in 5 years Choice 3. Put the money in a savings account that will have an interest rate of 12% per year compounded monthly Use an annual worth analysis to make a recommendation to Yani. Click here to access the TVM Factor Table Calculator

Yani has $12,000 for investment purposes. His bank has offered the following three choices: Choice 1. Aspecial savings certificate that will pay $180 each month for 5 years and a lump sum payment at the end of 5 years of $13,000 Choice 2. Buy a share of a racehorse for $12,000 that will be worth $24,000 in 5 years Choice 3. Put the money in a savings account that will have an interest rate of 12% per year compounded monthly Use an annual worth analysis to make a recommendation to Yani. Click here to access the TVM Factor Table Calculator

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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Question

Yani has $12,000 for investment purposes. His bank has offered the following three choices:
Choice 1. Aspecial savings certificate that will pay $180 each month for 5 years and a lump sum payment at the end of 5 years of
$13,000
Choice 2. Buy a share of a racehorse for $12,000 that will be worth $24,000 in 5 years
Choice 3. Put the money in a savings account that will have an interest rate of 12% per year compounded monthly
Use an annual worth analysis to make a recommendation to Yani.
Click here to access the TVM Factor Table Calculator
What is the annual worth of each choice?
Choice 1, Certificate: $
Choice 2, Racehorse: $
Choice 3, Savings Account: $
Carry all interim calculations to 5 decimal places and then round your final answer to the nearest dollar. The tolerance is +4.
Which choice should be recommended to Yani?

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