Account Paying a Fixed Rate - Long-Term Investment - Accounting and Finance Assignment Help

Assignment Task :

 practice questions 

Complete the following practice questions to consolidate your learning. 

1 Your company’s CEO wants sales to grow from $2 million today to $15 million in  10 years. What compound annual growth rate (CAGR) target does this represent?

2 You have just made an investment of $10,000 in an account paying a fixed rate of  5% per year. If you make no further payments into the account, how long will it  take to double your money? 

3 A benefactor wants to set up a perpetual scholarship fund paying $1,500 per  month. Assume the relevant interest rate is 1% per month. How much would the  benefactor have to invest now for this scholarship? 

4 Let’s say the benefactor in question 3 realises that $1,500 per month will not be  enough students in 5 or 10 years due to inflation. The benefactor therefore wants  to invest an amount that will provide a $1,500 payment per month initially but  grow over time by 0.2% per month. Assume the relevant interest rate is 1% per  month. How much would the benefactor have to invest now for this scholarship? 

5 Your first child has just been born and you have decided to make payments of  $1,000 per year into an account paying a fixed rate of 7% per year. You will start  making payments on their 1st birthday. When your child turns 20 years of age,  how much will be in the bank account, assuming you have just made a payment? 

6 Rework question 5 assuming the payments started immediately and the last  payment was on your child’s 19th birthday (i.e. the same number of payments).

7 You have been offered an investment that will pay a lump sum of $1,000 in 5 years  as well as an annual payment of $50 for 5 years, starting at the end of the first year.  If the interest rate per year for similar investments is 10%, what is the most you  should you pay for the investment now? 

8 You have won the lottery! You have to choose between a lump sum now of $1  million or an annual payment of $75,000 for 20 years, with the first payment made  immediately. You can invest the lump sum for a fixed 5% per year for the next 20  years. Which option should you choose to maximise your wealth?

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