1. Suppose you deposit $4,000 into an account earning 5% interest, compounded monthly. a. How many years will it take for your account to be worth $8,500? b. Suppose in addition to the initial $4,000 deposit, you will make monthly contributions of $50. How many years will it take for the account to grow to $8,500 in this case?
2. What is the maximum purchase price of an asset that gives a monthly net cash flow of $550 at the end of the month? The expected holding period is 10 years, the estimated selling price at that time is $1,384, and you want at least a 13.98% return per year.