Suppose you want to make an investment of $5,000, and you have two funds to choose from: Fund A and Fund B. Fund A will give you a return of $5,250 after a year. Fund B will give you a return of $1,200 per year in 5 annual installments. Consider the annual interest rate to be 2%. Based on the present value of the two future inflows, which of the two funds should you choose to invest your money in?

Suppose you want to make an investment of $5,000, and you have two funds to choose from: Fund A and Fund B. Fund A will give you a return of $5,250 after a year. Fund B will give you a return of $1,200 per year in 5 annual installments. Consider the annual interest rate to be 2%. Based on the present value of the two future inflows, which of the two funds should you choose to invest your money in?

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter5: The Time Value Of Money

Section: Chapter Questions

Problem 22P

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