HomeworkLib
Question

What is the highest Investment total I could achieve with a five year investment, rate of...

What is the highest Investment total I could achieve with a five year investment, rate of return of 10%, initial investment of $0 and a $100 annual investment? Will simple interest be greater than compound interest?

A. More than $650, Simple Interest > Compound Interest

B. Less than $650, Simple Interest < Compound Interest

C. $650 Simple Interest < Compound Interest

D. $650 Simple Interest = Compound Interest

business   finance   
0 0
Add a comment Improve this question Transcribed image text
Next > < Previous
Sort answers by oldest

Homework Answers

Answer #1

B. Less than $650, Simple Interest < Compound Interest

FV of annuity = Annuity*((1+r)^n-1)/r

=100*(1.1^5-1)/0.1

=610.51

The future value is 610.51 and simple interest will be less than compound interest since interest is paid only on principal and not on the interest.

0 0
Add a comment
Know the answer?
Add Answer to:
What is the highest Investment total I could achieve with a five year investment, rate of...
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for? Ask your own homework help question. Our experts will answer your question WITHIN MINUTES for Free.
Similar Homework Help Questions

  • If there is a 20 year, 10% rate of return with 0 initial investment, $100 annual...

    If there is a 20 year, 10% rate of return with 0 initial investment, $100 annual investment, expected inflation rate of 5%, how much money will I lose when accounting for inflation? A. Less than $1000 B. Between $1000 and $2000 C. Between $2000 and $3000 D. More than $3000

  • If I have a 10 year investment with a 5% rate of return and a $1000...

    If I have a 10 year investment with a 5% rate of return and a $1000 initial investment, what will happen if my inflation rate is bigger than my rate of return? . I will have less money than I invested after controlling for inflation B. I will have more money than I invested after controlling for inflation C. It depends on the tax rate D. It depends on my annual investment

  • b) At the end of five years, how much is an initial $500 deposit followed by...

    b) At the end of five years, how much is an initial $500 deposit followed by five year- end, annual $100 payments worth, assuming a compound annual interest rate of (i) 10%? (ii) 5%? [6 pts] c) At the end of six years, how much is an initial $500 deposit followed by five year- end, annual $100 payments worth, assuming a compound annual interest rate of (i) 10%? (ii) 5%? [6pts]

  • please answer all of the following questions 1. Which following statement is true, assuming an interest rate of gre...

    please answer all of the following questions 1. Which following statement is true, assuming an interest rate of greater than 0%: a. The present value of a dollar to be received one year from today is ALWAYS worth less than one dollar. b. The present value of a dollar to be received one year from today is ALWAYS worth more than one dollar. c. The present value of a dollar to be received one year from today is ALWAYS equal...

  • Consider a 2-year investment project that provides a compound annual rate of return of 10%. a)...

    Consider a 2-year investment project that provides a compound annual rate of return of 10%. a) Calculate the corresponding average simple annual rate of return. (2 marks) b) Calculate the corresponding 2-year rate of return based on the compound rate and the simple rate of return. (3 marks) c) Explain in words (no calculation should be provided) why the two rates in part (b) are the same. [Hint: Take a close look at the question and identify the key words(s)...

  • Problems The following are exercises in future (terminal) values: a. At the end of three years,...

    Problems The following are exercises in future (terminal) values: a. At the end of three years, how much is an initial deposit of $100 worth, assuming a compound annual interest rate of (i) 100 percent? (ii) 10 percent? (iii) 0 percent? b. At the end of five years, how much is an initial $500 deposit followed by five year-end, annual $100 payments worth, assuming a compound annual interest rate of (i) 10 per- cent? (ii) 5 percent? (iii) 0 percent?...

  • 2) A person paid $1,040 for a five year, $1,000, 8% bond. Required: a) Determine how...

    2) A person paid $1,040 for a five year, $1,000, 8% bond. Required: a) Determine how much cash the bondholder will receive each year as interest. b) Determine the amount of cash the bondholder will receive for his return on investment and the return of his investment for the $1,000 bond. Be sure to show your work. c) Determine if the effective (market) interest rate is less than, equal to, or greater than 12%.

  • 1) One of the following has returned the highest rate of return on investment since 1926?:...

    1) One of the following has returned the highest rate of return on investment since 1926?: A) U.S Treasury Bills B) Long-term corporate bond C) Small company stocks D) Common stocks 2) Which type of investments are considered diversified? A) Stock B) Bonds C) Derivatives D) Mutual funds 3) A basic rule in capital budgeting is that if a project's NPV is greater than zero, then the project should be accepted. A) True B) False 4) You're heavily invested in...

  • 1) A person paid $950 for a five year, $1,000, 9% bond. Required: a) Determine how...

    1) A person paid $950 for a five year, $1,000, 9% bond. Required: a) Determine how much cash the bondholder will receive each year as interest. b) Determine the amount of cash the bondholder will receive for his return on investment (950 paid) and the return of his investment for the $1,000 bond. Be sure to show your work. c) Determine if the effective (market) interest rate is less than, equal to, or greater than 12%.

  • A project has a service life of five years with the initial investment outlay of $200,000....

    A project has a service life of five years with the initial investment outlay of $200,000. If the discounted payback period occurs at the end of the project service life (say five years) at an interest rate of 10%, which of the following statements is true? A-The discounted payback period occurs at the end of project service life. B-The NPV of the project may equal or be greater than 0. C-We should invest in the project D-All of the above.

ADVERTISEMENT
Free Homework Help App
Download From Google Play
Scan Your Homework
to Get Instant Free Answers
Need Online Homework Help?
Ask a Question
Get Answers For Free
Most questions answered within 3 hours.
ADVERTISEMENT
ADVERTISEMENT