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Author Question: You have 5,000 in an index mutual fund. At an average annual rate of return of 10 per year, this ... (Read 125 times)

nevelica

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on: Jul 10, 2018
You have 5,000 in an index mutual fund. At an average annual rate of return of 10 per year, this investment should exceed a value of 500,000 by the time you retire in 40 years.
 
  Indicate whether the statement is true or false.

Question 2

You win the 5,000,000 lottery that pays you 250,000 per year over a 20-year period. Given negative interest rates, the lottery has a present value that is less than 5,000,000.
 
  Indicate whether the statement is true or false.


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bulacsom

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Reply #1 on: Jul 10, 2018
Answer to Question 1

Answer: FALSE
Explanation: FV = PV  (1 + r)n = 5,000  (1.1)40 = 226,296.28.

Answer to Question 2

Answer: FALSE
Explanation: You win the 5,000,000 lottery that pays you 250,000 per year over a 20 year period. Given negative interest rates, the lottery has a present value that is GREATER than 5,000,000.


nevelica

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Reply #2 on: Jul 10, 2018
Thank you


bulacsom

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Reply #3 on: Jul 10, 2018
No problemo


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