Suppose you have the opportunity to invest in a fund that pays 12% interest compounded annually. Today, you invest $10,000 into this fund. Three years later (EOY 3), you borrow $5000 from a local bank at 10% annual interest and invest it in a fund. Two years later (EOY 5) you withdraw enough money from the fund to repay the bank load and all interest due on it. Three years from this withdrawal (EOY 8) you start taking $2,000 per year out of the fund. After five withdrawals of $2,000, you have withdrawn your original $10,000. The amount remaining in the fund is earned interest. How much remains?
Suppose you have the opportunity to invest in a fund that pays 12% interest compounded annually. Today, you invest $10,000 into this fund. Three years later (EOY 3), you borrow $5000 from a local bank at 10% annual interest and invest it in a fund. Two years later (EOY 5) you withdraw enough money from the fund to repay the bank load and all interest due on it. Three years from this withdrawal (EOY 8) you start taking $2,000 per year out of the fund. After five withdrawals of $2,000, you have withdrawn your original $10,000. 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 you have the opportunity to invest in a fund that pays 12% interest compounded annually. Today, you invest $10,000 into this fund. Three years later (EOY 3), you borrow $5000 from a local bank at 10% annual interest and invest it in a fund. Two years later (EOY 5) you withdraw enough money from the fund to repay the bank load and all interest due on it. Three years from this withdrawal (EOY 8) you start taking $2,000 per year out of the fund. After five withdrawals of $2,000, you have withdrawn your original $10,000. The amount remaining in the fund is earned interest. How much remains?
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