Reference no: EM133036803
Questions -
Q1. Fred and Wilma are cousins born. They were both born on July 29th 1997. When Fred turned 20 he invested $8,500 and earns 7.5% compound interest. Wilma is planning to invest $17,000 when she turns 40 and will also earn 7.5% compound interest. Who will have more money when they both reach the age of 65, and by how much more? Explain why Fred will always have more money regardless of how long they live.
Q2. Congrats your group just won the lottery. The Ontario Lottery corporation has given you two options on how to collect your winnings. You are so excited to put into practice the material you learned at Yorkville University. Option 1 pays you $1,000,000 today Option 2 pays you $1,750,000 in five years from now Calculate the Present Value of both options with 5% discount rate. Then using the same rate base your analysis on the Future Value. Which option would you choose? What do your results suggest as a general rule for approaching such problems?
Q3. Barney deposited $10,000 into an account and in 5 years it had grown to $12,500. What is the annual rate of interest and what was the interest earned at the end of the fifth year.
Q4. Your aunt Gertrude always loved you the most out of all her nieces and nephews. You would always help her with chores around the house and as such she promised to give you $18,000 in five years from now. You are super excited to receive this money as you want to invest it for five years. You are going to purchase Lightspeed POS stock which is expected to give you a return of 8.6% per year. How much will you have at the end of this time? What would be an equivalent Present Value?
Q5. Lightspeed POS is looking to expand. The company will purchase new equipment which will allow them to grow cashflows in the range of 18-20%. Four years ago the company invested a whopping three hundred thousand dollars in a high-risk investment. When the CFO went to look at the investment, she saw that the original investment had grown by 1.27683 times. What rate of interest is Lightspeed POS earning on their money?