Question

Given a 7.00 percent interest rate, compute the year 10 future value of deposits made in years 1, 2, 3, and 4 of $1,500, $1,700, $2,000, and $2,000.

Consider a $1,500 deposit earning 4 percent interest per year for 7 years. How much total interest is earned on the original deposit (excluding interest earned on interest)?

At the beginning of the month, you owned $6,700 of Company G, $9,100 of Company S, and $3,200 of Company N. The monthly returns for Company G, Company S, and Company N were 8.35 percent, -1.61 percent, and -.12 percent. What is your portfolio return?

Answer 1

• Computation of year 10 future value of deposits

Future Value (FV) is the value of a current asset at a specified date in the future based on an assumed rate of growth. Formula for computing it is as follows :-

FV of deposit made in year 1 =

= $2,757.69

FV of deposit made in year 2 =

= $2,920.92

FV of deposit made in year 3 =

= $3,211.56

FV of deposit made in year 4 =

= $3,001.46

• Computing total interest earned on $1,500 for 7 years

Total Interest =

= $420

• Computing Portfolio Return

Investment in	Amount (in $)	Weight	Return	Weight * Return
Company G	6,700	6,700 / 19,000 = 0.3526	8.35%	2.9442%
Company S	9,100	9,100 / 19,000 = 0.4789	(1.61%)	(0.771%)
Company N	3,200	3,200 / 19,000 = 0.1684	(0.12%)	(0.0202%)
Total	19,000			2.153%

So Portfolio Return is 2.153%.