Question

Suppose you invested $5,000 in a CD on January 1, 2015 maturing in 20 years that pays interest of 4% per year compounded semiannually and credited at the end of each six month period. You don't withdraw any money from the CD during its term.

(a) How much money was in the CD account on July 1, 2015?

(b) How much money was in the CD account on January 1, 2016?

(c) How much money will be in the CD account on January 1, 2025?

(d) What is the total amount of interest paid on the CD during these 10 years?

(e) What is the effective annual rate of interest on this CD?

(f) When will the money in the CD account first be $10,000 or greater?

Answer #1

Suppose you invested $5,000 in a CD on January 1, 2015 maturing
in 20 years that pays interest of 4% per year compounded
semiannually and credited at the end of each six month period. You
don't withdraw any money from the CD during its term.
(a) How much money was in the CD account on July 1, 2015?
b) How much money was in the CD account on January 1, 2016?
(c) How much money will be in the CD...

10. Suppose you invested $2,000 in a CD on January 1, 2016
maturing 5 years that pays interest of 4% per year compounded
monthly and credited at the end of each month. You don't withdraw
any money for the CD during the term.
(a.) How much money will be in the CD account on January 1,
2021?
(b.) What is the effective annual rate of interest on this
CD?

Suppose that you invested $4,000 in a CD on January 1, 2015
maturing in 5 years that pays interest of 3% per year compounded
monthly and credited at the end of each month. You don't withdraw
any money from the CD during its term.
(a) How much money was in the CD account on
February 1, 2015?
(b) How much money was in the CD account on March 1,
2015?
c) How much money will be in the CD account on
January 1,...

3. Suppose you invest $20,000 in a CD on January 1, 2020
maturing in 14 years that pays interest of 5% per year compounded
semiannually (meaning every six months) and credited at the end of
each six month period. You don't withdraw any money from the CD
during the term.
(a) How much money is in the CD account on July 1,
2020?
(b) How much money is in the CD account on January 1,
2021?
(c) How much money...

Suppose you were hired on January 1, 2010 and started depositing
$200 at the end of each month, with the first deposit on January
31, 2010, in a pension fund that pays interest of 9% per year
compounded monthly on the minimum monthly balance and credited at
the end of each month.
(a) How much money was in the pension fund on February 1,
2010?
(b) How much money was in the pension fund on March 1, 2010?
(c) How...

Determining the better investment opportunity?
Option 1 - You just
invested $ 5,000 in a bank that pays you 4.25% simple interest.
After 3 years with no withdraw, what is your balance?
(n =3) (i =4.25%) (pv =-5000) (pmt =0)
fv =?)
Option 2 - You just
invested $ 5,000 in a bank that pays you 4.15% compounded monthly.
After 3 years with no withdraw, what is your balance?
(n =3*12) (i =4.15%/12) (pv = -5000)
(pmt = 0) fv...

Suppose you borrowed $200,000 for a home mortgage on January 1,
2015 with an annual interest rate of 6% per year. The balance on
the mortgage is amortized over 30 years with equal monthly payments
at the end of each month. (This means the unpaid balance on January
1, 2045 should be $0).
(a) What are the monthly payments?
(b) How much interest was paid during the 30 years of the
mortgage?
(c) What is the unpaid balance on the...

4. How much money needs to be deposited into a certificate of
deposit (CD) account to be able to withdraw 50,000.00 from the
account at the end of 10 years if the interest rate is 2%
compounded monthly?

1. You currently have AED40,000 and plans to purchase a 5-year
certificate of deposit (CD).
a. How much will you have when the CD matures if it pays 7%
interest, compounded annually?
b. How much will you have when the CD matures if it pays 6%, or
20% interest, compounded annually?
c. How much will you have when the CD matures if it pays 6%, or
20% interest, compounded semiannually?
d. Why does the annual compounding and semiannual compounding
give...

Sally invested $1,750 into an RRSP
that earned interest at 5% compounded semiannually for eight
years.
a. Determine the balance
of the account at the end of the period?
_____________
b. How much interest is
earned? ______________
c. What is the effective rate?
_____________

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