Problem:
An investor has $100,000 to invest in a business venture, or she can earn 10%/year with a $100,000 certificate of deposit for 4 years. Three possible business ventures have been identified. Any money not invested in the business venture can be put into a bank account that earns 7%/year.
|
End of Year
|
BV01
|
BV02
|
BV03
|
| 0 |
-$35,000 |
-$80,000 |
-$60,000 |
| 1 |
$0 |
$10,000 |
$0 |
| 2 |
$0 |
$10,000 |
$40,000 |
| 3 |
$0 |
$10,000 |
$0 |
| 4 |
$50,000 |
$90,000 |
$40,000 |
Required:
What is the future worth of each alternative?
Certificate of Deposit: $_________
- BV01: $_________
- BV02: $_________
- BV03: $_________