Yani has $12,000 for investment purposes. His bank has offered the following three choices. 1. A special savings certificate that will pay $100 each month for 5 years and a lump sum payment at the end of 5 years of $13,000; 2. Buy a share of a racehorse for $12,000 that will be worth $20,000 in 5 years; 3. Put the money in a savings account that will have an interest rate of 12% per year compounded monthly. Use an internal rate of return analysis to make a recommendation to Yani.
Yani has $12,000 for investment purposes. His bank has offered the following three choices. 1. A special savings certificate that will pay $100 each month for 5 years and a lump sum payment at the end of 5 years of $13,000; 2. Buy a share of a racehorse for $12,000 that will be worth $20,000 in 5 years; 3. Put the money in a savings account that will have an interest rate of 12% per year compounded monthly. Use an internal rate of return analysis to make a recommendation to Yani.
Chapter4: Time Value Of Money
Section: Chapter Questions
Problem 28P
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Yani has $12,000 for investment purposes. His bank has offered the following three choices. 1. A special savings certificate that will pay $100 each month for 5 years and a lump sum payment at the end of 5 years of $13,000; 2. Buy a share of a racehorse for $12,000 that will be worth $20,000 in 5 years; 3. Put the money in a savings account that will have an interest rate of 12% per year compounded monthly. Use an
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