Would you prefer to have an investment earning 5 percent for 40 years or an investment earning 10 percent for 20 years? Explain.
Answer to relevant QuestionsHow are present values affected by changes in interest rates?Show the time line for a $500 cash inflow today, a $605 cash outflow in year 2, and a 10 percent interest rate.A deposit of $750 earns interest rates of 9 percent in the first year and 12 percent in the second year. What would be the second year future value?Consider a $5,000 deposit earning 10 percent interest per year for 10 years. What is the future value, how much total interest is earned on the original deposit, and how much is interest earned on interest?How many years (and months) will it take $2 million to grow to $5 million with an annual interest rate of 7 percent?
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