Ask Question
BusinessBusiness
5 March, 08:21

You invest $1,000 today and expect to sell your investment for $2,000 in 10 years. (LO5-1) a. Is this a good deal if the interest rate is 6%? b. What if the interest rate is 10%?

+3
Answers (1)
  1. 5 March, 10:19
    0
    If the interest rate is 6%, then selling the investment for $2,000 is a good deal.

    If the interest rate is 10%, then selling the investment for $2,000 is a bad deal.

    Explanation:

    If the interest rate is 6% then compounded yearly for 10 years 1,000 should have a future value of

    1000*1.06^10=1,790

    SO if the interest rate is 6% then in 10 years the investment should have a future value of 1,790 and selling it for $2,000 is a very good deal as you are making more than 6% per year which is the interest rate.

    Now if the interest rate is 10% the future value will be

    1,000*1.1^10=2593

    Now the future value is more than 2,000 which means that we will be earning less than the interest rate, which means it is a bad deal.
Know the Answer?
Not Sure About the Answer?
Find an answer to your question ✅ “You invest $1,000 today and expect to sell your investment for $2,000 in 10 years. (LO5-1) a. Is this a good deal if the interest rate is ...” in 📘 Business if you're in doubt about the correctness of the answers or there's no answer, then try to use the smart search and find answers to the similar questions.
Search for Other Answers
You Might be Interested in
Reduced order cycle time has become an important part of supply chain management since it can lead to lower inventory levels for customers, improved cash flow, lower current assets and accounts receivable. True/False
Answers (1)
True or false: the market for wheat does exhibit the two primary characteristics that define perfectly competitive markets.
Answers (1)
Casa Del Sol Property Development Company is refurbishing a 200-unit condominium complex at a cost of $1,875,000. It expects that this will lead to expected annual cash flows of $415,350 for the next seven years.
Answers (1)
Which process turn economic resources into goods and services? Distribution. Marketing. Promotion. Production
Answers (1)
Match the benefit with its detailed explanation
Answers (1)
New Questions in Business
ABC Company insured its building on a replacement cost basis for $700,000 under a property insurance policy that included an 80 percent coinsurance clause. The building had a replacement cost of $1 million when it sustained a $40,000 loss.
Answers (1)
Which of the following are true? Select one or more: (a) The t-distribution is dependent on the sample size. (b) The t-distribution does not depend on the sample size.
Answers (1)
Santoyo Corporation keeps careful track of the time required to fill orders. Data concerning a particular order appear below: Hours Wait time 13.6 Process time 2.7 Inspection time 0.3 Move time 3.3 Queue time 7.0 The delivery cycle time was:
Answers (1)
During 2021, its first year of operations, Pave Construction provides services on account of $160,000. By the end of 2021, cash collections on these accounts total $110,000. Pave estimates that 25% of the uncollected accounts will be uncollectible.
Answers (1)
How often is interest earned from bonds usually paid to the bond holder? 1) Every month 2) Once per year 3) Twice per year 4) Every two years
Answers (1)
Home » Business » You invest $1,000 today and expect to sell your investment for $2,000 in 10 years. (LO5-1) a. Is this a good deal if the interest rate is 6%? b. What if the interest rate is 10%?
Sign Up Forgot Password?