Questions from General Investment

Q: The “Rule of 72” is a shortcut method to answer

The “Rule of 72” is a shortcut method to answer this question, “How long will it take to double my money if i earn a specified percentage such as 10 percent? Divide 72 by the rate, and the rule gives...

Q: The preceding problems can be solved using the interest tables supplied in

The preceding problems can be solved using the interest tables supplied in Appendix A. To test your ability to construct your own interest factors or to use a financial calculator, solve the following...

Q: A 40-year-old individual establishes a retirement account that

A 40-year-old individual establishes a retirement account that is expected to earn 7 percent annually. Contributions will be $2,000 annually at the beginning of each year. Initially, the saver expects...

Q: You are offered $900 five years from now or $150

You are offered $900 five years from now or $150 at the end of each year for the next five years. If you can earn 6 percent on your funds, which offer will you accept? If you can earn 14 percent on yo...

Q: You purchase 100 shares of stock at $100 ($10,

You purchase 100 shares of stock at $100 ($10,000); the margin requirement is 40percent. What are the dollar and percentage returns if a) You sell the stock for $112 and bought the stock for cash? b)...

Q: The following questions illustrate non annual compounding. a) One

The following questions illustrate non annual compounding. a) One hundred dollars is placed in an account that pays 12 percent. How much will be in the account after one year if interest is compounded...

Q: At the end of each year, Tom invests $2,

At the end of each year, Tom invests $2,000 in a retirement account. Joan also invests $2,000 in a retirement account but makes her deposits at the beginning of each year. They both earn 9 percent on...

Q: You purchase a $100,000 life insurance policy for a

You purchase a $100,000 life insurance policy for a single payment of $35,000. If you want to earn 9 percent on invested funds, how soon must you die for the policy to have been the superior alternati...

Q: You are offered an annuity of $12,000 a year

You are offered an annuity of $12,000 a year for 15 years. The annuity payments start after five years have elapsed. If the annuity costs $75,000, is the annuity a good purchase if you can earn 7 perc...

Q: You purchase a $1,000 asset for $800.

You purchase a $1,000 asset for $800. It pays $60 a year for seven years at which time you receive the $1,000 principal. Prove that the annual return on this investment is not 9 percent.