business finance

posted by naz

your dream car cost $100000 in four years time to purchase. you won a lottery of $65000. can your lottery sum buy you the car should you invest in 90 day 11% treasury bill?

  1. Henry

    P = Po(1+r)^n.

    r = 0.11/yr. * 0.25yr. = 0.0275/qtr.

    n = 4 comp./yr. * 4yrs = 16 Compounding
    periods.

    P = 65000(1.0275)^16 = $100,328.11 in
    4 yrs.

    90 days = approx. 1/4 of a yr.

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