Question

10) Joanna invests $10,000 in a bond that pays 8% interest, compounded annually (1 time per year).

How much does Joanna have after 1 year?

9) Nancy invest $10,000 in a bond that pays 8% interest, compounded quarterly (4 times per year). How much does Nancy have after 1 year?

10) Adam invests $10,000 in a high yield savings account that pays 3% interest, compounded monthly. How much does Paul have after 1 year?

11) Raza buys 1 share of Amazon Stock at $1700 on January 1st. She sells it one year later at $2000. What is her return on investment?

12) Angela buys 500 shares of McDonalds stock on 5/1/2000 at $120 and sells it on 12/31/2005 at $150 per share.

What is Angela’s return on investment? _________________________

What is Angela’s Capital Gain? _________________________________

13) Rita buys 100 shares of Apple stock at $200 and sells it one year later at $218 per share. Apple also paid a dividend of $2.00 per share to all shareholders that year.

What is Rita’s capital gain?

What is the dividend yield on the stock?

What is the total amount that Rita received from Apple in dividends?

What is Rita’s TOTAL return on investment?

Answer 1

10]

Joanna

future value = present value * (1 + (r/n))n*t

where r = annual interest rate

n = number of compounding periods per year

t = number of years

future value = $10,000 * (1 + (10%/1))1*1

future value = $10,800.00

9]

Nancy

future value = present value * (1 + (r/n))n*t

where r = annual interest rate

n = number of compounding periods per year

t = number of years

future value = $10,000 * (1 + (8%/4))4*1

future value = $10,824.32

10]

Adam

future value = present value * (1 + (r/n))n*t

where r = annual interest rate

n = number of compounding periods per year

t = number of years

future value = $10,000 * (1 + (3%/12))12*1

future value = $10,304.16

11]

Raza

ROI = (sale price - purchase price) / purchase price

ROI = ($2000 - $1700) / $1700

ROI = 17.65%