Which cash flow would you rather pay, $425 today or $500 in two years if interest rates are 10 percent? Why?
Answer to relevant QuestionsWhat is the value in year 3 of a $700 cash flow made in year 6 if interest rates are 10 percent?What annual rate of return is earned on a $5,000 investment when it grows to $9,500 in five years? What annual rate of return is earned on a $4,000 investment made in year 2 when it grows to $6,500 by the end of year seven? What kind of returns might you expect in the stock market? One way to measure how the stock market has performed is to examine the rate of return of the S&P 500 Index. To see historical prices of the S&P 500 Index, go to ...Compute the future value in year 7 of a $2,000 deposit in year 1 and another $2,500 deposit at the end of year 4 using an 8 percent interest rate.
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