1) You purchased a rare baseball card for $6,000 as an investment. Three years later you accidentally spilled coffee on

Question

1) You purchased a rare baseball card for $6,000 as an investment. Three years later you accidentally spilled coffee on it while working on your finance homework, and were forced to sell it for $4,500. What rate of return did you earn? A) 7.57%. B) 9.14%. C) 11.1%. D) 8.86%. E) 14.22. F) 12.04% 2) Shady Investment Company offers an investment that promises to double your money in 15 months. This investment promises to credits interest to your account every quarter. What quarterly rate must the investment earn to meet the promised return? A) 14.87% B) 18.57% C) 22.59% D) 36.99% E) 59.48% F) 62.55% 3) You plan to retire with $500,000 savings. You can make a deposit of $150 per month into a retirement saving account that pays 12 percent annual interest compounded monthly. How many years will you have to wait to retire? A) 18 years. B) 30 years. C) 98 years D) 123 years E) 198 years F) 277 years

Help In Homework · Accepted Answer

1) We can calculate the rate of return by using the following formula in excel:- =rate(nper,pmt,-pv,fv) Here, Rate = Rate of return Nper = 3 periods Pmt = 0 PV = $6,000 FV = $4,500 Substituting the values in formula: = rate(3,0,-6000,4500) = -9.14% Correct option is B) -9.14% 2) We can calculate the rate of return by using the following formula in excel:- =rate(nper,pmt,-pv,fv) Here, Rate = Rate of return (monthly) Nper = 15 periods (monthly) Pmt = 0 PV = $100 FV = $100*2 = $200 Substituting the values in formula: = rate(15,0,-100,200) = 4.73% Effective annual rate = (1 + Rate)^n-1 = (1+4.73%)^12-1 = 1.7412 - 1 = 74.12% Quarterly rate = EAR / 4 = 74.12% / 4 = 18.53% Correct option is B) 18.57% ; It is closet to 18.53% 3) We can calculate the number of periods by using the following formula in excel:- =nper(rate,pmt,pv,-fv) Here, Nper = Number of periods (monthly) Rate = 12%/12 = 1% (monthly) Pmt = $150 PV = $0 FV = $500,000 Substituting the values in formula: = nper(1%,150,0,-500000) = 355.38 months Number of years = Nper / 12 = 355.38 / 12 = 29.61 years or 30 years Correct option is B) 30 years

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1) You purchased a rare baseball card for $6,000 as an investment

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= 29.61 years or 30 years

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