1. Why does it take more money to get back to even after big investment loss?
A. The recovery percentages grow exponentially because you have so few dollars working for you after a big loss
B. It is difficult to choose the right investments that will grow fast enough to replace the gains
C. The recovery percentages grow slowly because you have so few dollars working for you after a big loss
2. Consider an investment project where the cash flow pattern repeats itself every five years forever. Use the capitalized equivalent method to compute the present worth of this project with an interest rate of 15.6%.
The cash flow for the five years is given below: ($)
94
94
66
66
15