Question - Your brother has asked you to help him with choosing an investment. He has $4,900 to invest today for a period of two years. You identify a bank CD that pays an interest rate of 0.0500 annually with the interest being paid quarterly. What will be the value of the investment in two years?
You are evaluating a growing perpetuity product from a large financial services firm. The product promises an initial payment of $22,000 at the end of this year and subsequent payments that will thereafter grow at a rate of 0.05 annually. If you use a discount rate of 0.07 for investment products, what is the present value of this growing perpetuity?