2. Time Value of MoneyAssume that twenty years from now, you will need $50,000 and that your bankcompounds interest at a 2 percent annual rate.A. How much do you need to deposit today in order to have a balance of $50,000 in20 years? Explain and show your work.B. Suppose instead that you want to make equal payments in years 1 through 19 toaccumulate $50,000 in year 20, how large must each of the 19 payments be?Explain. C. If your (very reliable) aunt were to offerfor you or to give you $35,000 one year from now, which would you choose?Explain. (Even if you could not solve for the answer in part B, please explainwhat criterion you would use to make the choice.)make thepayments found in part (B)3. Capital Asset Pricing ModelA. Suppose you invest $400,000 in Treasury Bills that have a yield to maturity of 4%and $600,000 in the market portfolio with an expected return of 14%. What is theexpected return on your portfolio? Please show and explain.

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Assume that twenty years from now, you will need $50,000 and that your bank compounds interest at a 2 percent annual rate. A. How much do you need to deposit today in order to have a balance of $50,000 in 20 years? Explain and show your work.

Assume that twenty years from now, you will need $50,000 and that your bank compounds interest at a 2 percent annual rate. A. How much do you need to deposit today in order to have a balance of $50,000 in 20 years? Explain and show your work.

Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter11: Capital Budgeting Decisions

Section: Chapter Questions

Problem 3PB: Use the tables in Appendix B to answer the following questions. A. If you would like to accumulate...

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Question

2. Time Value of Money
Assume that twenty years from now, you will need $50,000 and that your bank
compounds interest at a 2 percent annual rate.
A. How much do you need to deposit today in order to have a balance of $50,000 in
20 years? Explain and show your work.
B. Suppose instead that you want to make equal payments in years 1 through 19 to
accumulate $50,000 in year 20, how large must each of the 19 payments be?
Explain.

C. If your (very reliable) aunt were to offer
for you or to give you $35,000 one year from now, which would you choose?
Explain. (Even if you could not solve for the answer in part B, please explain
what criterion you would use to make the choice.)
make the
payments found in part (B)
3. Capital Asset Pricing Model
A. Suppose you invest $400,000 in Treasury Bills that have a yield to maturity of 4%
and $600,000 in the market portfolio with an expected return of 14%. What is the
expected return on your portfolio? Please show and explain.

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