1) An investment produces a return of -20% in year one and then +20% in year two,...
Fantastic news! We've Found the answer you've been seeking!
Question:
a) For an initial investment of $10,000, what is the final amount received at the end of year two?
b) What return in year two would be required to breakeven and get back to $10,000?
2) An investment adviser offers you an investment which for $1,200 today will pay $1,500 in 9 months.
a) What is the simple interest rate that the investment adviser is promising?
b) If you felt that a 12% simple interest rate was more realistic, how much money would you need to invest to achieve the $1,500 in 9 months?
3) Suppose that you invest $1,000 in a 3-month bank CD and at the end of each quarter you "roll it over" (i.e., reinvest) into another 3-month CD and you do this for one year. The simple interest rates for each quarter are 3%, 3.5%, 4%, and 4.5%. respectively.
a) What is the final amount received at the end of one year?
b) What is the (total) return, or simple interest rate, for the whole one year period?
Related Book For
Personal Financial Planning
ISBN: 9780357438480
15th Edition
Authors: Randy Billingsley, Lawrence J. Gitman, Michael D. Joehnk
Posted Date: