1215

An investor has the choice of two investments. Investment A offers interest at 7.25% compounded quarterly. Investment B offers interest at the annual rate of 7.40%. Which investment offers the higher dollar return on an investment of $50,000 for two years, and by how much?

A) Investment B offers a $36.92 greater return.

B) Investment A offers a $122.18 greater return.

C) Investment A offers a $53.18 greater return.

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Investment A: I = 7.25 / 4; N = 2 × 4 = 8; PV = $50,000; PMT = 0; CPT → FV = $57,726.98
Investment B: I = 7.40; N = 2; PV = $50,000; PMT = 0; CPT → FV = $57,673.80
Difference = investment A offers a $53.18 greater dollar return.

1215

Lois Weaver wants to have $1.5 million in a retirement fund when she retires in 30 years. If Weaver can earn a 9% rate of return on her investments, approximately how much money must she invest at the end of each of the next 30 years in order to reach her goal?

A) $50,000.

B) $28,725.

C) $11,005.

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Using a financial calculator: N = 30; I/Y = 9; FV = -1,500,000; PV = 0; CPT → PMT = 11,004.52.

cheifmic

 thx