Investment in Bank Deposit Analysis

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					ACCOUNTING: What the Numbers Mean, 8e
Chapter 3 Exercise 3.4                                             Name: Enter Name


General Spreadsheet Instructions:

   Step 1:       Review General
                  Spreadsheet
                  Instructions                                              Complete the problem
                                                                               requirements by
                                                                             entering appropriate
                           Step 2:        Review
                                                                              dollar amounts or
                                        Exercise 3.4                        formulas in "shaded"
                                        Worksheet                              worksheet cells

                                                 Step 3:   Complete
                                                            Analysis
                                                           Worksheet

                                                                  Step 4:            Respond to
                                                                              "What the Numbers Mean"
                                                                                     Worksheet
ACCOUNTING: What the Numbers Mean, 8e
Chapter 3 Exercise 3.4                                                                  Name: Enter Name


Problem Description:

         You have accumulated $8,000 and are looking for the best rate of return that can be earned over the next year. A bank
         savings account will pay 6%. A one-year bank certificate of deposit will pay 8%, but the minimum investment is $10,000.



Instructions:

         Please proceed to the "Analysis" worksheet and complete the basic problem requirements. Complete the problem
         requirements by entering appropriate amounts or formulas in shaded worksheet cells:

           a. Calculate the amount of return you would earn if the $8,000 were invested for one year at 6%.
           b. Calculate the net amount of return you would earn if $2,000 were borrowed at a cost of 15%, and then $10,000
              were invested for one year at 8%.
           c. Calculate the net rate of return on your investment of $8,000 if you accept the strategy of part b.

         After completing the "Analysis" worksheet, please proceed to the "What the Numbers Mean" worksheet and respond
         to the additional requirements presented.
ACCOUNTING: What the Numbers Mean, 8e
Chapter 3 Exercise 3.4                                                                                 Name: Enter Name


Complete the Modeling:

            a. Calculate the amount of return you would earn if the $8,000 were invested for one year at 6%.

                                x                     =



           b. Calculate the net amount of return you would earn if $2,000 were borrowed at a cost of 15%, and then $10,000
              were invested for one year at 8%.

               Return on $10,000 at 8%

                                x                     =

               Cost of $2,000 at 15%

                                x                     =

               Net return

                                 -                    =



            c. Calculate the net rate of return on your investment of $8,000 if you accept the strategy of part b.

                                 /                    =
ACCOUNTING: What the Numbers Mean, 8e
Chapter 3 Exercise 3.4                                                                                   Name: Enter Name


What does it mean? Question 1:
         In addition to the amount of investment required and the rate of return offered, what other factors would you normally
         take into consideration before making an investment decision such as the one described in this problem?

				
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