14. Find the present value of $2000 due in three years and 8 months if money is worth 8% p.a. compounded quarterly.
15. How long does it take for money to double at 5% compounded annually.
13. Determine the amount of money that must be invested for 245 days at 5.75% to earn $42.46
a) PV of 2000 due in 3 yrs & 8 months @ 8% compounded quarterly
PV = FV/(1+r)^(n); n = (3*12 + 8)/4 (4 for qtrly compounding)
= 2000/(1+5%)^11
= 1169.36
b) FV=PV*(1+r)^n
FV = 2; PV=1; r=5% compounded annually; n=?
2=1*(1.05)^n
solving for n we get 14.2 yrs
Using rule of 72 the no. of years it takes to double investment = 72/intrest rate = 72/5 ~ 14.4 yrs
c) How much to be invested for 245 days at 5.75% to earn $42.46
Here I am assuming the intrest rate to be per annum and we have to earn 42.46 as total investment value after 245 days
PV = FV/(1+r)^n; r = 5.75^
= 42.46/(1+5.75%)^(245/365)
= 40.90
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