Case : Muffin Megabucks
Basic Concepts: The Time Value of Money
Muffin Megabucks is considering two different savings plans. The first
plan would have her deposit $500 every six months, and she would
receive interest at a 7 percent annual rate, compounded semiannually.
Under the second plan she would deposit $1,000 every year with a rate of
interest of 7.5 percent, compounded annually. The initial deposit with
Plan 1 would be made six months from now and, with Plan 2, one year
hence.
1. What is the future (terminal) value of the first plan at the end of 10
years?
2. What is the future (terminal) value of the second plan at the end of
10 years?
3. Which plan should Muffin use, assuming that her only concern is
with the value of her savings at the end of 10 years?
4. Would your answer change if the rate of interest on the second
plan were 7 percent?
Answers
Answered by
6
Answer:
Your question is so long
Answered by
5
Answer:
Muffin Megabucks is considering two different savings plans. The first
plan would have her deposit $500 every six months, and she would
receive interest at a 7 percent annual rate, compounded semiannually.
Under the second plan she would deposit $1,000 every year with a rate of
interest of 7.5 percent, compounded annually. The initial deposit with
Plan 1 would be made six months from now and, with Plan 2, one year
hence.
1. What is the future (terminal) value of the first plan at the end of 10
years?
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