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Evaluating the contract option

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1. Kate Eden received a graduation present of $2,000 that she is planning on investing in a mutual fund that earns 8.5 percent each year.  How much money can she collect in 3 years?

2. Sam Braxton, the number one draft pick of the Phoenix Cardinals (NFL), and his agent are evaluating the following contract option.  The contract provides for a series of annual payments over the next three years.  What is the present value of these payments if Sam's required rate of return is 10 percent? (Hint: discount each cash flow to the present and then sum.)

Year 1: $1,000,000

Year 2: $1,250,000

Year 3: $1,500,000

3. You invest $1,500 in a mutual fund today that pays 9 percent interest every year.  How long will it take to double your money in years?

4. What is the future value of $10,000 invested at 10% for 10 years with continuous compounding?

Reference no: EM131238360

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