Envision that you have served as business manager of media world for over 2 years.
you have noticed that for the last 12 months the business has regularly had cash assets of
$20,000 or more at the end of each month. you have found a 6-month certificate of
deposit that pays 6% compounded monthly. to obtain this rate of interest, you must
invest a minimum of $2,000. you have also found a high interest savings account that
pays 3% compounded daily. based on the cash position of the business at this time,
assume that you decide to invest $4,000.
1. assume that you will invest the full amount in a certificate of deposit.
a. what would be the future value of the cd at the end of the investment term? (14
points)
b. how much interest would the investment eam for the period? (14 points)
c. what would be the effective rate of the investment? (14 points)
2. assume that you decide to invest the $4,000 in the high-interest savings account.
a. what future value would you expect to receive at the end of 6 months? (14 points)
b. how much interest would the investment earn for the period? (14 points)
c. what would be the effective rate of the investment? (14 points)
3. write a recommendation to the partners justifying a short-term investment of business
funds at this time, recommending one of these investments. include your analysis
from questions 1 and 2 in your recommendation. (16 points)

Onsider the following subscription behavior information from genie, a web site that provides tools for constructing a family tree (ancestor search). subscriptions cost $9.99 per month, but you are charged for the entire year at the time of purchase. there is a one-year minimum term when you sign up for the service. once purchased, subscriptions are set to renew automatically unless the subscriber cancels them. when a membership renews, it renews for a one-year term and again you are charged for the entire year. there are no variable costs associated with providing this service to an individual customer, but genie does engage in customer relationship activities that they believe will increase customer retention. these customer relationship activities cost genie about $10 per year per customer. based on a sample of 1000 customers that joined genie five years ago, near the time when the company was founded, they were able to determine how many of those customers remained subscribers in the second year, third year etc. based on this information, genie calculated the average annual retention rate to be 20%. genie uses an annual discount rate of 8%. a. last year, genie spent $10,000 placing advertisements on google. genie management believes that these advertisements were responsible for about 300 new subscribers. would you recommend to genie management that they purchase more google ads? b. suppose a newly-introduced loyalty program increases the number of customers that remained to 30%. does this new data change your answer to 9.a? c. do you have any hesitations or concerns about making recommendations to management based on your above estimate of customer lifetime value?