You have OMR 12,000 in cash. You can deposit it today in a mutual fund earning 8.2 percent semiannually; or you can wait, enjoy some of it, and invest OMR 11,000 in your brother's business in two years. Your brother is promising you a return of at least 10 percent on your investment. Whichever alternative you choose; you will need to cash in at the end of 10 years. Assume your brother is trustworthy and that both investments carry the same risk. Which one will you choose?

You have OMR 12,000 in cash. You can deposit it today in a mutual fund earning 8.2 percent semiannually; or you can wait, enjoy some of it, and invest OMR 11,000 in your brother's business in two years. Your brother is promising you a return of at least 10 percent on your investment. Whichever alternative you choose; you will need to cash in at the end of 10 years. Assume your brother is trustworthy and that both investments carry the same risk. Which one will you choose?

Excel Applications for Accounting Principles

4th Edition

ISBN:9781111581565

Author:Gaylord N. Smith

Publisher:Gaylord N. Smith

Chapter27: Time Value Of Money (compound)

Section: Chapter Questions

Problem 6E

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Similar questions

You put $250 in the bank for S years at 12%. A. If interest is added at the end of the year, how much will you have in the bank after one year? Calculate the amount you will have in the bank at the end of year two and continue to calculate all the way to the end of the fifth year. B. Use the future value of $1 table in Appendix B and verity that your answer is correct.
Refer to the present value table information on the previous page. What amount should Brett have in his bank account today, before withdrawal, if he needs 2,000 each year for 4 years, with the first withdrawal to be made today and each subsequent withdrawal at 1-year intervals? (Brett is to have exactly a zero balance in his bank account after the fourth withdrawal.) a. 2,000 + (2,000 0.926) + (2,000 0. 857) + (2,000 0.794) b. 2,0000.7354 c. (2,000 0.926) + (2,000 0.857) + (2,000 0.794) + (2,000 0.735) d. 2,0000.9264
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