Question

Inflation refers to

	a.	rising prices.
	b.	declining prices.
	c.	the opposite of wealth.
	d.	the opposite of stagflation.
	e.	declining interest rates.

Nithya is single. She puts $3000 a year ($250/month) into her retirement plan at work. Her company matches with another $3,000! Nithya stays with this company and her investments earn an average of 6% a year. ABOUT How much will Nithya have in her account in 30 years?

		$90,000
		$1,235,000
		$475,000
		$235,000
		$650,000

The stated interest rate on your account is 5% with interest compounded monthly. If you deposit $50 each month, how much will you have in your account in 5 years? (Use the 5 financial keys.)

	a.	$3,000
	b.	$4,350
	c.	$3,050
	d.	$3,200
	e.	$3,400

Answer 1

Inflation referes to rising prices.

Future Value of Annuity = {A/i} * {(1+i)^n - 1}

A- Annuity i.e Payment per perriod

i- interest rate

n- no. of periods

Now Nithya invests 6000 per year (3000 her share & 3000 company's share) at the interest rate of 6% for 30 years

So, A=6000, i=6/100=0.06, n=30

Amount available after 30 years = {6000 / 0.06} * {(1+0.06)^30 - 1}

= 100000 * {5.75 -1}

= 100000 * 4.75

= 475000

For last part of the question

A= 50 , i=5% per annum = 0.05 per annum = 5% / 12 per month = 0.05/12 = 0.00417 , n=60 months (5 years)

Amount available after 5 years = {A/i} * {(1+i)^n - 1}

=  { 50 / (0.05/12) } * {[1+(0.05/12)]^60 - 1}

= 12000 * {0.283359

= 3400