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If you had invested 45% in stock and 20% in Treasury bonds, would you have more or less of a gain after the three years?reinclude in your response:

User IRTFM
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6 votes

Answer:

1.) The balance is of $22,330.86

2.) Gain of $2,330.86

3.) Less of a gain.

Explanation:

Initially, we have $20.000.

We make the following investments:

All of them for 3 years.

45%, with interest 4.35% at a treasure bond.

15%, with interest 3.75%, at the CD.

20% in the stock. Increases 8%, then decreases 4%, then increases 6%.

Remainder(100 - (45+15+20)) = 20% in savings, with 2.9% interest.

1. Balance at the end of the third year:

How much money you will have, this is the sum of the four investments.

Treasure bond:

0.45*20000 = 9000.

9000 invested in treasure bond. In 3 years you will have.

4.35% = 0.0435

Tr = 9000*(1 + 0.0435)^3 = 10226.33

CD:

0.15*20000 = 3000

Cd = 3000*(1 + 0.0375)^3 = 3350.31

Stock:

0.2*20000 = 4000

Increases 8%(multiplies by 1 + (8/100) = 1.08), decreases by 4%(multiplies by 1 - (4/100) = 0.96), increases by 6%(multiplies by 1 + (6/100) = 1.06). So

St = 4000*1.08*0.96*1.06 = 4396.03

Savings:

0.2*20000 = 4000

Sa = 4000*(1 + 0.029)^3 = 4358.19

Balance:

The sum.

B = Tr + Cd + St + Sa = 10226.33 + 3350.31 + 4396.03 + 4358.19 = 22330.86

2.

You invested $20000.

Now you have $22330.86.

So you earned 22330.86 - 20000 = 2330.86.

So a gain of $2,330.86

3.

In the first exercise, we found a balance of 22330.86.

Now we have to find the Balance if we had invested 45% in stock and 20% in treasure, that is, if we had switched those two applications. So

Treasure bond:

0.2*20000 = 4000.

4000 invested in treasure bond. In 3 years you will have.

4.35% = 0.0435

Tr = 4000*(1 + 0.0435)^3 = 4545.04

CD:

0.15*20000 = 3000

Cd = 3000*(1 + 0.0375)^3 = 3350.31

Stock:

0.452*20000 = 9000

Increases 8%(multiplies by 1 + (8/100) = 1.08), decreases by 4%(multiplies by 1 - (4/100) = 0.96), increases by 6%(multiplies by 1 + (6/100) = 1.06). So

St = 9000*1.08*0.96*1.06 = 9891.07

Savings:

0.2*20000 = 4000

Sa = 4000*(1 + 0.029)^3 = 4358.19

Balance: 4545.04 + 3350.31 + 9891.07 + 4358.19 = 22144.61

The balance is smaller than in the first case, so you would have less of a gain.

User Wishart
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