Suppose that you have an opportunity to invest in a fund that pays 12% interest compounded annually. Today, you invest P10,000 into this fund. Three years later, you borrow P5,000 from a local bank at 10% effective annual interest and invest it in the fund. Two years later, you withdraw enough money from the fund to repay the bank loan and all interest due on it. Three years later from this withdrawal you start taking P2,000 per year for 5 years out of the fund. After 5 years, you have withdrawn your original P10,000. The amount remaining in the fund is earned interest. How much remains?
Suppose that you have an opportunity to invest in a fund that pays 12% interest compounded annually. Today, you invest P10,000 into this fund. Three years later, you borrow P5,000 from a local bank at 10% effective annual interest and invest it in the fund. Two years later, you withdraw enough money from the fund to repay the bank loan and all interest due on it. Three years later from this withdrawal you start taking P2,000 per year for 5 years out of the fund. After 5 years, you have withdrawn your original P10,000. The amount remaining in the fund is earned interest. How much remains?
Chapter11: Capital Budgeting Decisions
Section: Chapter Questions
Problem 6MC: You want to invest $8,000 at an annual Interest rate of 8% that compounds annually for 12 years....
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Suppose that you have an opportunity to invest in a fund that pays 12% interest compounded
annually. Today, you invest P10,000 into this fund. Three years later, you borrow P5,000 from a
local bank at 10% effective annual interest and invest it in the fund. Two years later, you withdraw
enough money from the fund to repay the bank loan and all interest due on it. Three years later
from this withdrawal you start taking P2,000 per year for 5 years out of the fund. After 5 years, you
have withdrawn your original P10,000. The amount remaining in the fund is earned interest. How
much remains?
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