Question

1)

Orange Valley Industrial just bought supplies from Red Royal Aviation. Orange Valley Industrial has been offered the 3 possible payment options described in the table. If the discount rate is 11.95 percent, which of the assertions is true?

Option	Terms of payment (amount and timing) from Orange Valley Industrial to Red Royal Aviation
A	20,739 dollars in 1 year(s)
B	32,735 dollars in 5 years
C	50,958 dollars in 9 years

		Orange Valley Industrial should prefer option B more than option A, and Orange Valley Industrial should prefer option A more than option C
		Orange Valley Industrial should prefer option B more than option A, and Orange Valley Industrial should prefer option C more than option A
		Orange Valley Industrial should prefer option A more than option B, and Orange Valley Industrial should prefer option C more than option A
		Orange Valley Industrial should prefer option A more than option B, and Orange Valley Industrial should prefer option A more than option C

2)

2 year(s) ago, Jabari invested 22,226 dollars. He has earned and will earn 5.71 percent per year in compound interest. If Mary invests 20,092 dollars in 1 year(s) from today and earns simple interest, then how much simple interest per year must Mary earn to have the same amount of money in 8 years from today as Jabari will have in 8 years from today? Answer as a rate in decimal format so that 12.34% would be entered as .1234 and 0.98% would be entered as .0098.

3)

For each of the 4 investments described in the table, the investor would pay 1,200 dollars today to purchase the investment. Each investment would have the annual return noted in the table and each investment would make a single, lump sum payment to the investor in the number of years from today noted in the table. If RC > RD and TL > TP, then which assertion is true? All annual returns and numbers of years from today when the single, lump sum payment will be made are greater than zero.

Investment	Annual return	Number of years from today when the single, lump sum payment will be made
C	RC	T
D	RD	T
L	R	TL
P	R	TP

		Investment C will make a larger single, lump sum payment in T years than investment D will make in T years, and investment P will make a larger single, lump sum payment in TP years than investment L will make in TL years
		Investment C will make a larger single, lump sum payment in T years than investment D will make in T years, and investment L will make a larger single, lump sum payment in TL years than investment P will make in TP years
		Investment D will make a larger single, lump sum payment in T years than investment C will make in T years, and investment P will make a larger single, lump sum payment in TP years than investment L will make in TL years
		Investment D will make a larger single, lump sum payment in T years than investment C will make in T years, and investment L will make a larger single, lump sum payment in TL years than investment P will make in TP years

Answer 1

1.
A=20739/1.1195^1=18525.23448

B=32735/1.1195^5=18616.23513

C=50958/1.1195^9=18449.96273

Orange Valley Industrial should prefer option A more than option B, and Orange Valley Industrial should prefer option C more than option A

2.
=(22226*1.0571^10/20092-1)/7
=13.2503%

3.
Investment C will make a larger single, lump sum payment in T years than investment D will make in T years, and investment L will make a larger single, lump sum payment in TL years than investment P will make in TP years