Question

Suppose that the value of an investment in the stock market has increased at an average compound rate of about 5% since 1912. It is now 2016.

**a.** If someone invested $1,000 in 1912, how much
would that investment be worth today? **(Do not round
intermediate calculations. Round your answer to 2 decimal
places.)**

**b.** If an investment from 1912 has grown to $1
million, how much was invested in 1912?

Old Time Savings Bank pays 3% interest on its savings accounts.
If you deposit $3,000 in the bank and leave it there: **(Do
not round intermediate calculations. Round your answers to 2
decimal places.)**

**a.** How much interest will you earn in the first
year?

**b.** How much interest will you earn in the
second year?

**c.** How much interest will you earn in the 10th
year?

Answer #1

a. Value of Investment today = 1000 * (1 + Interest)^Years

Value of Investment today = 1000 * (1.05)^105

Value of Investment today = 1000 * 167.833

**Value of Investment today = $167832.63**

**b.** If an investment from 1912 has grown to $1
million, how much was invested in 1912?

Value of Investment today = 1000 * (1 + Interest)^Years

1000000 = 1000 * (1 + Interest)^105

1000 = (1 + Interest)^105

**Interest = 6.80%**

c. Old Time Savings Bank pays 3% interest on its savings
accounts. If you deposit $3,000 in the bank and leave it there:
**(Do not round intermediate calculations. Round your answers
to 2 decimal places.)**

**a.** How much interest will you earn in the first
year? 3000 * 3% = **$90**

**b.** How much interest will you earn in the
second year? 3090 * 3% = $92.70

**c.** How much interest will you earn in the 10th
year? 3000 * (1.03^10 - 103^9) = **$117.43**

Old Time Savings Bank pays 4% interest on its savings accounts.
If you deposit $2,800 in the bank and leave it there: (Do
not round intermediate calculations. Round your answers to 2
decimal places.)
a. How much interest will you earn in the first
year?
b. How much interest will you earn in the
second year?
c. How much interest will you earn in the 10th
year?

Investments in the stock market have increased at an average
compound rate of about 5% since 1903. It is now 2012.
a.
If you invested $1,000 in the stock market in 1903, how much
would that investment be worth today? (Do not round
intermediate calculations. Round your answer to 2 decimal
places.)
Investment
$
b.
If your investment in 1903 has grown to $1 million, how much did
you invest in 1903? (Do not round intermediate
calculations. Round your answer...

1. First City Bank pays 7 percent simple interest on its savings
account balances, whereas Second City Bank pays 7 percent interest
compounded annually. If you made a deposit of $16,000 in each bank,
how much more money would you earn from your Second City Bank
account at the end of 11 years? (Do not round intermediate
calculations and round your answer to 2 decimal places, e.g.,
32.16.)
Difference ____________
2. Assume that in 2014, an 1872 $20 double eagle...

First City Bank pays 8 percent simple interest on its savings
account balances, whereas Second City Bank pays 8 percent interest
compounded annually.
Required:
If you made a deposit of $10,500 in each bank, how much more
money would you earn from your Second City Bank account at the end
of 10 years? (Do not round intermediate calculations and
round your answer to 2 decimal places (e.g.,
32.16).)
Difference
$

Old Time Savings Bank pays 5% annual interest rate on its
savings accounts. If you deposit $2100 in the bank and leave it
there. Assume bank pays annual compounded interest. How much
interest will you earn in the first year? How much interest will
you earn in the thrid year? How much interest will you earn in the
8th year? [Please round your answer to the nearest whole
number]
Multiple Choice
$105;$122;$155
$105;$122;$148
$105;$116;$148
$105;$116;$155

You company has just purchased some new computers using a 5-year
bank loan of $65,000. The interest rate on the loan is 7 percent
annually, and the loan calls for equal annual payments. Prepare an
amortization schedule for the 5-year loan. (Do not round
intermediate calculations and round your answers to 2 decimal
places, e.g., 32.16. Leave no cells blank - be certain to enter "0"
wherever required.)
b.
How much interest will your company pay in the third...

You invested $5,000 in a savings deposit 9 quarters ago and it
has grown to $5776 today. What nominal rate of annual interest
(compounding quarterly) did you earn? (expressed as a percentage to
two decimal places; don’t use the % sign)

You invested $2,000 in a savings deposit 7 quarters ago and it
has grown to $2831 today. What nominal rate of annual interest
(compounding quarterly) did you earn? (expressed as a percentage to
two decimal places; don’t use the % sign)

Problem 4 and 5-6 Present Value and Annuity Payments
A local furniture store is advertising a deal in which you buy a
$4,400 living room set with three years before you need to make any
payments (no interest cost is incurred).
How much money would you have to deposit now in a savings
account earning 6 percent APR, compounded monthly, to pay the
$4,400 bill in three years? (Do not round intermediate
calculations and round your final answer to 2...

Consider a $2,800 deposit earning 7 percent interest per year
for six years.
What is the future value? (Do not round intermediate
calculations. Round your answer to 2 decimal places.)
How much total interest is earned on the original deposit?
(Do not round intermediate calculations. Round your answer
to 2 decimal places.)
How much is interest earned on interest? (Do not round
intermediate calculations. Round your answer to 2 decimal
places.)

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