Both you and your older brother would like to have $27,000 in 11 in years. Because...
Both you and your older brother would like to have $27,000 in 11 in years. Because of your success in this class, you feel that you are a more savvy investor than your brother and will be able to earn an annual return of 11.4 percent compared to your brother's 9.9 percent. How much less than your brother will you have to deposit today?
Homework Answers
Present value=Cash flow*Present value of discounting factor(rate,time period)
Present value for me =$27000/1.114^11
=$27000*0.304974059
=$8234.30(Approx).
Present value for my brother =$27000/1.099^11
=$27000*0.354018031
=$9558.49(Approx).
Hence less deposit to be made=$9558.49-$8234.30
=$1324.19(Approx).
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