Question

Question No : 3

- If you deposit 10 $ in an account, that pays 5% interest, compounded annually, how much you will have at the end of 10 years? 50 years and 100 years
- How much will be in account at the end of 5 years the amount deposited today is 10,000 and interest is 8% per year, compounded semiannually?
- How much would I have to deposit in an account today that pays 12% interest, compounded quarterly, so that I have a balance of 20,000 in the account at the end of 10 years?
- Suppose you deposit 1,00,000 in an account today that pays 6% interest compounded annually. How long does it take before the balance in your account is 5,00,000?
- At what interest rate an investment of 12,000 be compounded annually to become 28,000 in 12 years?

Answer #1

a. | Deposit Amount= | 10 | ||

Interest Rate = | 5% | Annual Compounding | ||

Value of deposits at the end of - | ||||

10 Years
= |
10x(1+0.05)^10 = | 16.29 | ||

50 Years
= |
10x(1+0.05)^50 = | 114.67 | ||

100 Years
= |
10x(1+0.05)^100 = | 1,315.01 | ||

b. | Deposit Amount= | 10,000 | ||

Interest Rate = | 8% | Semi-Annual Compounding | ||

Value of deposits at the end of - | ||||

5 Years = |
10000 x (1+(0.08/2))^(5x2) = | |||

10000 x 1.04^10 | ||||

14802.44 | ||||

c. | Deposit Amount= | A | ||

Interest Rate = | 12% | Quarterly Compounding | ||

Value of deposits at the end of - | ||||

10 Years
= |
20000 | |||

20000= | A x (1+(0.12/4))^(10x4) = | |||

20000= | A x 1.03^40 = | |||

20000= | A x 3.2620 = | |||

A = | 20000/3.2620 | |||

A = | 6131.14 | |||

d. | Deposit Amount= | 1,00,000 | ||

Interest Rate = | 6% | Annual Compounding | ||

Value of deposits at the end of x years = 500000 | ||||

100000 x (1+0.06)^X = | 500000 | |||

1.06^x = | 500000/100000 = 5 | |||

At x = 27 | 4.82 | |||

At x = 28 | 5.11 | |||

Therefore it will take 28 years to reach 500000 | ||||

e. | Deposit = | 12000 | ||

Rate = | r | Annual Compounding | ||

Value at the end of 12 years = | 28000 | |||

12000 x (1+r)^12 = | 28000 | |||

(1+r)^12 = | 28000/12000 | |||

(1+r)^12 = | 2.33 | |||

Using Linear Interpolation - | ||||

7% | 2.25 | |||

r | 2.33 | |||

6% | 2.01 | |||

(r-6)/(7-6) = | (2.33-2.01)/(2.25-2.01) | |||

r-6 = | 0.33809748 | |||

r= | 6.34 | |||

5-1
FUTURE VALUE If you deposit $10,000 in a bank
account that pays 10% interest annually, how much will be in your
account after 5 years?
5-2
PRESENT VALUE What is the present value of a
security that will pay $5,000 in 20 years if securities of equal
risk pay 7% annually?
5-3
FINDING THE REQUIRED INTEREST RATE Your parents
will retire in 18 years. They currently have $250,000, and they
think they will need $1,000,000 at retirement. What annual...

1. You originally opened a savings account with a $4,000
deposit. Today the account has a balance of $10,000. 7 years have
passed since you opened the account. What rate of interest have you
earned assuming the account has compounded annually?
2.You just deposited $5,000 into an account. If you allow the
money to grow for 9 years, what will be your ending account
balance? Assume the account has earned 8% compounded quarterly.
3.You originally opened a savings account with...

You are planning to deposit $100,000 into a bank account and to
leave the funds on deposit for 12 years. Bank A pays interest at a
rate of 3%, compounded annually. Bank B pays interest at a rate of
2.5%, compounded semiannually. Bank C pays interest at a rate of
2.2% compounded daily.
If you put your money into Bank A, how much will you have in
the account after the 12 years?
If you put your money into Bank...

13. You deposit $100 at the end of each quarter in an account
that pays 6% interest compounded quarterly. Find the balance in the
account after 20 years, in correct units and rounded appropriately.
How much of this balance is principal and how much is interest?
Please spell these words correctly!

You currently have $20,000 in a bank account that pays you 5
percent interest annually. You plan to deposit $800 (starting 1
year from now) every year for the next 10 years in the same
account. How much are you going to have in that account at the end
of 10 years?
You currently have $20,000.01 in a bank account that pays you 5
percent interest annually. You plan to withdraw
$800 (starting 1 year from now) every year for...

If you deposit $1000 per month into an investment account that
pays interest at a rate of 6% per year, compounded quarterly, how
much will be in the account at the end of 5 years?
a) Solve the question under the assumption that there is no
inter-period compounding.
b) Solve the question under the assumption that there is
inter-period compounding.

You deposit $740 at the end of each quarter into an account that
pays a nominal annual rate of 16% compounded quarterly. How much
will you have in the account at the end of 15 years?

Present Value Computation
Pete Frost made a deposit into his savings account 3 years ago, and
earned interest at an annual rate of 8%. The deposit accumulated to
$20,000. How much was initially deposited assuming that the
interest was compounded (a) annually, (b) semiannually, and (c)
quarterly?
Use Excel or a financial calculator for computation. Round your
answer to nearest dollar.
(a)
Annually
Answer
(b)
Semiannually
Answer
(c)
Quarterly
Answer

Present Value Computation
Pete Frost made a deposit into his savings account 3 years ago, and
earned interest at an annual rate of 8%. The deposit accumulated to
$21,000. How much was initially deposited assuming that the
interest was compounded (a) annually, (b) semiannually, and (c)
quarterly?
Use Excel or a financial calculator for computation. Round
your answer to nearest dollar.
(a)
Annually
Answer
(b)
Semiannually
Answer
(c)
Quarterly
Answer

You deposit $1000 at the end of each month in an account that
pays a 3% interest rate compounded monthly.
1. How much will be in the account after 10 years? 2. What was
your total contributions? 3. How much interest did you earn?
Please print clearly. thanks!

ADVERTISEMENT

Get Answers For Free

Most questions answered within 1 hours.

ADVERTISEMENT

asked 2 minutes ago

asked 8 minutes ago

asked 9 minutes ago

asked 9 minutes ago

asked 9 minutes ago

asked 12 minutes ago

asked 12 minutes ago

asked 13 minutes ago

asked 24 minutes ago

asked 41 minutes ago

asked 42 minutes ago

asked 44 minutes ago