Dan Boyd is a financial planner trying to determine how to invest $100,000 for o

Question

Dan Boyd is a financial planner trying to determine how to invest $100,000 for one of his dients. The cash flows for the flive investments under consideration are summarized in the following table: Summary of Cash In-Flows and Out-Flows Year 1 Year 2 +0.45 1.00 0.000.00 0.00 Year 3 +1.05 Year 4 (at Beginning of Year 0.00-1.00 0.00 0.001.00 1.25 1.00 0.00 1.00 0.00+1.30+1.65 1.30 0.0 For example, if Dan invests $1 in investment A at the beginning of year 1, he will receive $0.45 at the beginning of year 2 and another $1.05 at the beginning of year 3. Alternatively, he can invest %1 in investment B at the beginning of year 2 and receive $1.30 at the beginning of y ar 4. Entries of 0.00 in the preceding table indicate tines when no cash i flows or out-flows can occur. The minimum required investment for each of the possible investments is $50,000. Also, at the beginning of each year, Dan may also place any or all of the available money in a money market account that is expected to yield 5% per year. How should Dan plan his investments r he nants to nadmie the ar une ame ev salable to- dlient at the end of year 47

Explanation / Answer

Since C invested money in 1st year and received highest in the beginning of the 4th year, so Dan should invest money in the 1st year.

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