Question

1). If you had $1000 in a simple interest account paying an interest rate of 5% per period, how many periods would it take for the account balance to double?

2). Epsilon Enterprises has a total of $200,000 in long-term notes payable on the books, accruing interest at a rate of 12%. If the tax rate is 28%, how big of a tax shield does Epsilon Enterprises have?

Answer #1

1.When simple interest is applied, then interest is not earned on the interest amount. For simple interest, every period the interest amount would be same. When account balance doubles, it becomes $2000 out of which 2000-1000 = $1000 is due to interest

Simple Interest amount= Principal*rate*period

Or, 1000= 1000*0.05*period

Or period = 20

Thus, 20 periods are required.

2. Tax shield reduces the amount of taxes payable because interest on debt can be deducted before arriving at taxable income.

The interest expense = 0.12*200,000 = $24,000.

Tax shield each year = interest expense*tax rate = 24000*0.28 = $6,720.

Thus, tax shield each year is $6,720.

How long would it take for $1000 to grow to in an account paying
3.6% interest compounded monthly?

1. If you deposit $6,500 into an account paying 8% annual
interest compounded monthly, how much money will be in the account
after 7 years?
2. If you deposit $5,000 into an account paying 6% annual
interest compounded monthly, how long until there is $8,000 in the
account?
3. At 3% annual interest compounded monthly, how long will it
take to double your money?

(1 pt) Cicely invests 3600 dollars in an account paying an
effective rate of interest of 5 percent. Two years later, she
deposits an additional 1650 dollars. If there are no other
transactions, how long will it take (from the time of the first
investment) for her account balance to reach 8600 dollars? (Assume
simple interest between compoundings.)
Answer = (blank) years and (blank) days.
(Note: your answer for the number of years should be a whole
number, while your...

(step by step calculation please) Suppose you invest $1000 in an
account paying 6% interest per year. What is the balance in the
account after 3 years? Calculate how much of this balance
corresponds to “interest on interest”

How
long does it take to double your capital if you put it in an
account paying compound interest rate at a rate of 7%? What if the
account pays simple interest ? What if the account pays
continuiusly compounded interest?

an account paying annual interest was ooened with OMR2000 10
years ago. today, the account balance is OMR 3500. if the same
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92.6 b.150 c.56.90 d. 80.40 e.115.20

an account paying annual interest was ooened with OMR2000 10
years ago. today, the account balance is OMR 3500. if the same
interest rate is offered on an account paying simple interest, how
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92.6 b.150 c.56.90 d. 80.40 e.115.20

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b) How many years will it take to double the money you currently
have? Assume you
continue to earn the same interest rate you did over the last
ten years

1. (Interest Rate for multiple periods)You have an opportunity
to invest $1000 today to acquire an asset which will generate $300
in income two years from today and which can be sold for $900 at
that time.
a. Determine the rate of return for this investment. b. What
level of the market interest rate would make this investment
attractive to you?
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hoping it will be worth $2000 someday. Assume...

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b) Solve the question under the assumption that there is
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