1- How much must you invest at 11% interest in order to see your investment grow to...

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Finance

1-
How much must you invest at 11% interest in order to see yourinvestment grow to $31,000 in 13 years? Use Appendix B to calculatethe answer.
$7,399
none of these
$7,364
$7,998
2-
Sharon Smith will receive $1.03 million in 25 years. Thediscount rate is 10%. As an alternative, she can receive $94,760today. Which should she choose? Use Appendix B to calculate theanswer.
$94,760 today.
the $1.03 million dollars in 25 years.
she should be indifferent.
need more information.

Answer & Explanation Solved by verified expert

4.5 Ratings (664 Votes)

1)	$ 7,998

Working:

	Present value	=	Future value	x	Present value of 1
		=	$ 31,000	x	0.258
		=	$ 7,998

	Working:

	Present value of 1	=	(1+i)^-n		Where,
		=	(1+0.11)^-13		i	11%
		=	0.258		n	13

2)	she should be indifferent.

Working:

Present value of $ 1.03 million in 25 years		=	Future value	x	Present value of 1
		=	$ 10,30,000	x	0.092
		=	$ 94,760

Present value of 1		=	(1+i)^-n		Where,
		=	(1+0.10)^-25		i	10%
		=	0.092		n	25

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1-How much must you invest at 11% interest in order to see yourinvestment grow to $31,000 in 13 years? Use Appendix B to calculatethe answer.$7,399none of these$7,364$7,9982-Sharon Smith will receive $1.03 million in 25 years. Thediscount rate is 10%. As an alternative, she can receive $94,760today. Which should she choose? Use Appendix B to calculate theanswer.$94,760 today.the $1.03 million dollars in 25 years.she should be indifferent.need more information.