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i Safari File Edit View History Bookmarks Window Help t ) 40% D Tue 7:18 PM E czto.mheducation.com CH11 HW instructions Ihelp Question 1 (of 5) Save & Et Submit 10.00 points You want to invest $10,000 in a business opportunity. If you keep the money invested in the business for two years, you will receive $11,000 back. If you keep the money invested in the business for five years, you will receive $13,000 back. Currently, the money s in your savings account, which earns 5% interest, compounded annually. Futu e Value 0 1 Present Value o $1, Future Value Annuity 0 $1 Present Value Annuity of $1.) (Use appropriate factor from the PV tables.) a. What is the future value of the money if it remains in your savings account for two years? (Round your answer to the nearest dollar amount.) Future Value b. What is the future value of the money if it remains in your savings account for five years? (Round your answer to the nearest dollar amount.) Future Value c. Is it better to invest in the business for two years, five years, or not at all? 0 2 Years 5 Years Not at all References Problem Difficulty: 1 Easy Learning Objective: 11-S1 Use present value and future value tables to incorporate the time 24

Explanation / Answer

1a. Future value of money if it remains in savings account for two years = $10,000*Future value of $1 at 5% and 2 years = 10,000*1.1025 = $11,025

b. If the amount is in savings account for 5 years then future value =$10,000*Future value of $1 at 5% and 5 years =10,000*1.2763 = $12,763

c. If money is invested in business then return is $13,000. This is greater than the two amounts computed above.

Hence the answer is “5 years”.

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