Q01: With regard to the future value of investment, consider the following two investment plans and give assessment that which plan generates more money in terms of amount and interest?

a. If you put $1,000 into an investment paying 08 percent interest compounded semi- annually, how much will your account grow to in 10 years? How much interest you will earn in 10 years period?

b. If you invest $500 in a bank where it will earn 20 percent interest compounded quarterly, how much will it be worth at the end of 7 years? How much interest you will earn in 07 years period?

Q2: With regard to compound interest, a sum of $800,000 has been placed in an investment project. Determine the compound amount after 4 years where interest rate is 10% per year compounded:

1. semi-annually
2. quarterly
3. Under which compounding plan semiannually or quarterly, is total interest higher?

Q3: Consider an investment plan that earns an annual interest rate of 20% per year. Determine and give explanation that which compounding plan give better effective interest rate?

1. when interest is compounded monthly
2. when interest is compounded quarterly

Answer rating: 100% (QA)

The Time Value of Money Q1a If you put 1000 into an investment paying 08 percent interest compounded semiannually how much will your account grow to i... View the full answer