Reference no: EM133102301

Questions -

Q1) Harrison invests $10,000 in an account that pays 5% simple interest. How much more could he have earned over a 7-year period if the interest had compounded annually? Which one is likely to be used by financial institutions such as banks more commonly in Canada?

Q2) Ahmad is likely to receive $30,000 in three years. Once the cash flow is received, he will invest it for seven more years at 5.5% per year. How much will he have at the end of this time? What would be an equivalent Present Value?

Q3) Alisha just received $278,000 from an estate settlement. She has considered saving and investing this money for her retirement. Currently, her goal is to retire 38 years from today. How much more will she have in your account on the day she retires if she can earn generate a return of 9.5% rather than just 9.0%? Show detailed calculations according to formula and the financial calculator.

Q4) Michael invested $2,000 12 years ago. Michael's friend, Lisa also invested $4,000 6 years ago. Today, both Michael's and Lisa's investments are each worth $9,700. Assume that both Michael and Lisa are earning their rates of returns, what should the average annual interest rate be earned by Lisa? Is it higher or lower than the return earned by Michael? Justify the answer with calculations and reasoning both.

Q5) Graphically show and describe the relationship between the present value and the discount rate in the context of TVM. Give an example to justify your position.