Investment

1 A bank investment of $100 is made by Alpha which provides an annual return of 8% (simple interest) and principle plus interest is left in the bank for 5 years to accumulate Beta also invests $100 at this bank for a term of 5 years and earns compound interest compounded annually At the end of 5 years when the investments are cashed in:

Alpha receives more

They receive identical amounts

Beta receives more

Alpha receives $164

There is not enough information provided to solve this problem

2?If 8% is compounded quarterly for 3 years then the interest rate (r) for a single period used in a time-value money calculation would be

None of the other alternatives are correct

8%

3%

2%

4%

3?If you borrowed $1,000 for a 3 year period, with a simple interest rate of 10% per annum, the total interest to be paid would be

$750

None of the other alternatives are correct

$500

$300

$1,000

4?Your friend has just turned 50 years old, and has asked you for your advice He is starting to think about retirement and would like to withdraw from the bank $15,000 per year for 15 years after he turns 65 years of age How much does your friend have to deposit for the next 15 years to ensure that there is enough money to last for 15 years after he retires? The bank has a special retirement fund that will pay 6% per year for the first 15 years and 8% per year after your friend turns 65 years of age for retirement income (Rounded to the nearest dollar)

$4,911

$5,516

$6,259

None of the other alternatives are correct

Solution: