Author Question: If a US Saving bond can be purchased for 29.50 and has a maturity value at the end of 25 years of ... (Read 110 times)

soccerdreamer_17 · **on:** Jul 10, 2018

If a US Saving bond can be purchased for 29.50 and has a maturity value at the end of 25 years of 100, what is the annual rate of return on the bond?

A) 5 percent
B) 6 percent
C) 7 percent
D) 8 percent
E) 4 percent

Question 2

Which of the following choices will result in a greater future value at age 65?

Choice number 1 is to invest 3,000 per year from ages 20 through 26 (a total of seven investments) into an account and then leave it untouched until you are 65 (another 39 years). Choice number 2 is to begin at age 27 and make 3,000 deposits into an investment account every year until you are 65 years old (a total of 39 investments). Each account earns an average of 10 per year. (The investments are end-of-year payments.)
A) Choice 1 is better than choice 2 because it has a FV of 1,304,146.89, which is greater than choice 2 FV of 1,204,343.33.
B) Choice 2 is better than choice 1 because it has a FV of 1,304,146.89, which is greater than choice 1 FV of 1,204,343.33.
C) Choice 2 is better than choice 1 because it has a FV of 1,204,343.33, which is greater than choice 1 FV of 1,171,042.63.
D) Choice 1 is better than choice 2 because it has a FV of 1,288,146.89, which is greater than choice 2 FV of 1,204,343.33.

Jevvish · **Reply #1 on:** Jul 10, 2018

Answer to Question 1

A

Answer to Question 2

Answer: C
Explanation: C) Choice 1: FV = PMT (1 + r)n = 3,000 (1.10)39 = 1,171,042.63.
Choice 2: FV = PMT = 3,000 = 1,204,343.33.