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Each year,$7,500 is invested at 4% annual compound interest

a) What is the value of the investment portfolio after 20 years?After 25 years?After 30 years?

b) Repeat part (a) with the investment at 5% annual compound interest

c) Based answers to (a) and (b) what conclusion can be drawn regarding the impact of the interest earned versus the duration of the investment.

Posted Aug 26 2019

Answered on Aug 27 2019
A./ VALUE OF INVESTMENT 20 YEARS = PRESENT VALUE OF ANNUITY * FVIFA 4%, 20YEARS FVIFA= FUTURE VALUE INTERESTFACTOR ANNUITY VALUE OF INVESTMENT 20 YEARS= $7500 * 29.778 = $223335 VALUE OF INVESTMENT 25 YEARS = PRESENT VALUE OF ANNUITY * FVIFA 4%, 25YEARS FVIFA= FUTURE VALUE INTERESTFACTOR ANNUITY VALUE OF INVESTMENT 25 YEARS= $7500 * 41.646 = $312345 VALUE OF INVESTMENT 30 YEARS = PRESENT VALUE OF ANNUITY * FVIFA 4%, 30YEARS FVIFA= FUTURE VALUE INTERESTFACTOR ANNUITY VALUE OF INVESTMENT 30 YEARS= $7500 * 56.805 = $426038 B./ VALUE OF INVESTMENT 20 YEARS = PRESENT VALUE OF ANNUITY * FVIFA 5%, 20YEARS FVIFA= FUTURE VALUE INTERESTFACTOR ANNUITY VALUE OF INVESTMENT 20 YEARS= $7500 * 33.066 = $247995 VALUE OF INVESTMENT 25 YEARS = PRESENT VALUE OF ANNUITY * FVIFA 5%, 25YEARS FVIFA= FUTURE VALUE INTERESTFACTOR ANNUITY VALUE OF INVESTMENT 25 YEARS= $7500 * 47.727 = $357953 VALUE OF INVESTMENT 30 YEARS = PRESENT VALUE OF ANNUITY * FVIFA 5%, 30YEARS FVIFA= FUTURE VALUE INTERESTFACTOR ANNUITY VALUE OF INVESTMENT 30 YEARS= $7500 * 66.439 = $498293 C./ BASED ON THE ABOVE CALCULATIONS MADE WE CAN EASILY FOUND THAT THE INTEREST EARNNING RATE IS GOING ON INCEREASING WITH THE DURATION OF INVESTMENT. THERE IS A DIRECT RELASIONSHIP BETWEEN THE INTEREST RATE EARNNED AND DURATION OF INVESTMENT.

Caterpillar, Inc CNH Global
2014 2013 2012 2013
ROE 18.94% 20.51% 35.87% 20.68%

I have performed DuPont analysis on Caterpillar Inc. and its closest competitor, CNH Global. Your analysis should include a discussion of the strengths or weaknesses revealed in each ratio. Please analyze the ROE. (please do not copy any info from google or investopia).

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