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What is the balance in the account after 3 years

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Reference no: EM13487619

1.Consider the following alternatives:

i. $100 received in one year

ii. $200 received in five years

iii. $300 received in ten years

a. Rank the alternatives from most valuable to least valuable if the interest rate is 10% per year.

b. What is your ranking if the interest rate is only 5% per year?

c. What is your ranking if the interest rate is 20% per year?

2.Suppose you invest $1000 in an account paying 8% interest per year.

a. What is the balance in the account after 3 years? How much of this balance corresponds to “interest on interest”?

b. What is the balance in the account after 25 years? How much of this balance corresponds to interest on interest?

Reference no: EM13487619

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