1) You have €12 000 in cash. You can deposit it today in the mutual fund earning 8.2% semi-annually, or you can stay, benefit from some of it, and invest €11 000 in your brother’s business in 2 years. Your brother is assuring you a return of at least 10% on your investment. Either alternative you select, you will require to cash in at the end of ten years. suppose your brother is trustworthy and both investments carry similar risk.
2) Jack comes to a decision to purchase a car. He can also lease the car or buy it with the 3 year loan. Car he wants to purchase costs $45,000. Dealer has the special leasing arrangement where he pays $1 today and $650 per month at commencement of each month for next 3 years. If he purchases car, he will pay it off in monthly payments over next 3 years at an 10% annual percentage interest rate (APR) with monthly compounding. He also believes that he will be able to sell car for= $30,000 in 3 years.
problem: Compute the present value of the total costs if Jack decides to lease the car?