Question

**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 |

Answer #1

**(a)-The amount deposited if the
interest was compounded annually**

Present Value = Future Value / (1 +
r)^{n}

= $21,000 / (1 +
0.04)^{3}

= $21,000 / (1.08) ^{3}

= $21,000 / 1.259712

= $16,670.48

**(b)-The amount deposited if the
interest was compounded semi-annually**

Present Value = Future Value / (1 +
r)^{n}

= $21,000 / [1 +
(0.08/2)]^{3x2}

= $21,000 / (1.04)^{6}

= $21,000 / 1.265319018

= $16,596.61

**(c)-The amount deposited if the
interest was compounded quarterly**

Present Value = Future Value / (1 +
r)^{n}

= $21,000 / [1 +
(0.08/4)]^{3x4}

= $21,000 / (1.02)^{12}

= $21,000 / 1.268241795

= $16,558.36

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

Future Value Computation
You deposit $4,000 at the end of every year for 4 years. How much
will accumulate in 4 years if you earn 6% compounded annually? Use
Excel or a financial calculator for computation. Round your answer
to nearest dollar.

Determine the amount of money in a savings account at the end of
3 years, given an initial deposit of $5,000 and a 16 percent annual
interest rate when interest is compounded: Use Appendix A for an
approximate answer, but calculate your final answer using the
formula and financial calculator methods. (Do not round
intermediate calculations. Round your final answers to 2 decimal
places.)
future value
a
annually
?
b
semiannually
?
c
quarterly
?

Determine the amount of money in a savings account at the end of
10 years, given an initial deposit of $10,000 and an annual
interest rate of 16 percent when interest is compounded: Use
Appendix A for an approximate answer, but calculate your final
answer using the formula and financial calculator methods Future
value a. Annually b. Semiannually c. Quarterly

Twenty years ago, your grandfather deposited $500 in a savings
account earning 4% annually, with interest compounded on a
quarterly basis. What is that savings account worth today? What
would the savings account be worth if interest were compounded
monthly?

For a deposit of $1027 at 6.4% over 2 years, find the
interest earned if interest is compounded semiannually,
quarterly, monthly, daily, and continuously.
The interest earned if interest is compounded semiannually
is----
2
Find the present value of the following future amount.
$2000 at 10% compounded annually for 30 years
The present value is-----
3 Suppose a savings and loan pays a nominal rate of
1.4%
on savings deposits. Find the effective annual yield if interest
is compounded quarterly...

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...

16. You have $1,000 to deposit in a savings account for 1 year.
You can get a passbook savings
account drawing 7.75% interest compounded continuously, or a
certificate of deposit paying 8%
compounded quarterly, or a savings bond paying 8.25% compounded
annually. Which alternative
should you take?
a. 7.75% compounded continuously
b. 8% compounded quarterly
c. 8.25% compounded annually
d. all of the above are have equal annualized yields
17. You are considering two investments described below:
Investment
A 10%...

What EAR is being earned on a deposit of $5,000 made ten years
ago today if the deposit is worth $9,948.94 today? The deposit pays
interest semi-annually. A. 3.56 percent B. 6.76 percent C. 7.00
percent D. 7.12 percent

Mark intends to deposit $300 per year for the next 10 years in
an account that pays 8% annual interest. Determine the total
return, principal, and interest of each investment and assume all
deposits are made at the end of each period.
A. $300 is deposited annually (6 points)
B. $150 is deposited semiannually (6
points)
C. $75 is deposited quarterly (6 Points)
D. How does increasing the frequency of compounding impact the
total return? (2 Points)

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