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Suppose an investment has been offered to you that requires an initial outlay of $10,000. Ten years from now the investment will pay you $20,000. If you think an investment of this type should offer a return of 8%, should you make the investment?? Explain your analysis...

Public Comments

1. if you require 8% return from an investment based on its risk profile and the current risk free rate you should not make the investment. I am estimating since I do not have a calculator with me but the rate of return to double in 10 years is about 7.2% less than you require from the type of investment
2. This is just brief and not in depth but according to my rough calculations a $10,000 investment with an 8% compounded growth annually would be worth approx $21,589 at the end of 10 years which for all intensive purposes is more than double your original investment so yes, nothing wrong with putting $10K there. A $10,000 initial outlay with 8% compounded growth At the End of Year 1 should be $10,800 At the End of Year 2 should be $11,664 At the End of Year 3 should be $12,597 At the End of Year 4 should be $13,605 At the End of Year 5 should be $14,693 At the End of Year 6 should be $15,869 At the End of Year 7 should be $17,138 At the End of Year 8 should be $18,509 At the End of Year 9 should be $19,990 At the End of Year 10 should be $21,589 Problem is nothing is guaranteed and there is always RISK INVOLVED causing the market value to flunctuate, sometimes downward in the wrong direction, Best Bet is never be greedy and put all your investment eggs in one basket. By the way, one major shortfall or something often overlooked in a lot of investment strategies is paying taxes, yuh!
3. Based on the compound interest calculator in the link, a $10,000 investment at 8% compounded interest would be worth $21,589 in 10 years. The $20,000 is obviously less than the 8% target.