Suppose you have an opportunity to invest in a fund that pays 12% interest compounded annually. Today, you invest $10,000 into this fund. Three years later (EOY 3), you borrow $5,000 from a local bank at 10% annual interest and invest it in the fund. Two years later (EOY 5), you withdraw enough money from the fund to repay the bank start loan and all interest due on it. Three years from this withdrawal (EOY 8) you taking $2,000 per year out of the fund. After five withdrawals of $2,000, you have withdrawn your original $10,000. The amount remaining in the fund is earned interest. How much remains? Hint: Draw a cash-flow diagram.
