Answer:
$14,250
Explanation:
To determine what amount of money will make Fred take his chances and invest in this new business, we first have to solve this equation:
- current wealth - (% chance of losing money x wealth after losing money)
$12,000 - (20% x $3,000) = $12,000 - $600 = $11,400
Then:
$11,400 / 80% of getting wealthier = $14,250
Answer:
a) $1,875
b) $ 2,083
Explanation:
a) Notes Payable $150,000
Interest Rate (10%) $15,000
Proceeds from Note $1,875 - 15000/8
b) Notes Payable $150,000
Discount Factor (10%) $166,667
Finance Cost $16,667
Proceeds from Note $2,083.33 - 16667/8
D) They are ranked by how quickly we can access the cash.
Answer: b. 10 year treasury notes
Explanation:
All options listed are backed by the US Government so the couple will not have to worry about any of these options not paying them in time for their kids to go for college.
The best option would be the 10 year Treasury notes because the other options either mature way sooner than the 15 required years ( treasury bills mature in a year) or after the required 15 years ( 20 and 30 year treasury bonds).
When the 10 year note matures in 10 years, the proceeds if not enough, can be further invested in a 5 year note thereby ensuring that the payment for college will be received in 15 years.
