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?