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Which investment offers the highest return

Problem: Determine which of the following three investments offers you the highest rate of return on your $1,000 investment over the next five years.

Investment 1: $2,000 lump sum to be received in five years
Investment 2: $300 at the end of each of the next five years
Investment 3: $250 at the beginning of each of the next five years
Q1. Which investment offers the highest return?

Q2. Which offers the highest return if the payouts are doubled (i.e., $4,000, $600, and $500)?

Q3. What causes the big change in the returns on the annuities?

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Solution Preview :

Prepared by a verified Expert

Finance Basics: Which investment offers the highest return

Reference No:- TGS01451324

Have a Question? (oR Write a Review)

Recent Questions Asked Finance Basics

Q : Estimated revenue for each type of hedge

Q : Forward rate as unbiased predictor of the future spot rate

Q : Classify the cost as product or period-variable or fixed

Q : Daily expenditure and the firms annual savings

Q : Which investment offers the highest return

Q : Time required to double the value of an investment

Q : Calculate the annual end-of-year loan payment

Q : Create schedule showing cash inflows and outflows of fund

Q : Which source of financing gives the lower expected cost

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Solution Preview :

Prepared by a verified Expert

Finance Basics: Which investment offers the highest return

Reference No:- TGS01451324

Recent Questions Asked Finance Basics

Q : Estimated revenue for each type of hedge

Q : Forward rate as unbiased predictor of the future spot rate

Q : Classify the cost as product or period-variable or fixed

Q : Daily expenditure and the firms annual savings

Q : Which investment offers the highest return

Q : Time required to double the value of an investment

Q : Calculate the annual end-of-year loan payment

Q : Create schedule showing cash inflows and outflows of fund

Q : Which source of financing gives the lower expected cost

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