Homework 1

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Rutgers University *

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33:390:435

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Finance

Date

Jan 9, 2024

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xlsx

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29

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a. How much will Jim have on deposit at the end of seven years? Investment $12,000 Rate 6.00% Years 7 Year Deposit Interest 0 $12,000 $0 1 $720 2 $763 3 $809 4 $858 5 $909 6 $964 7 $1,021 Formula b. Assuming the deposit earned a 9 percent rate of intere would he have at the end of seven years? Investment $12,000 Rate 9.00% Quarters 28 Years Deposit Interest 0 $12,000 $0 1 $270 2 $276 3 $282 4 $289 5 $295 6 $302 1. Jim makes a deposit of $12,000 in a bank a
7 $309 8 $316 9 $323 10 $330 11 $337 12 $345 13 $353 14 $361 15 $369 16 $377 17 $385 18 $394 19 $403 20 $412 21 $421 22 $431 23 $441 24 $450 25 $461 26 $471 27 $482 28 $492 Formula In comparing (a) and (b), what are the respective effectiv Scenario A Year 1 $12,720 Scenario B Year 1 $13,117
Balance $12,000 $12,720 $13,483 $14,292 $15,150 $16,059 $17,022 $18,044 $18,044 est compounded quarterly, how much Balance $12,000 $12,270 $12,546 $12,828 $13,117 $13,412 $13,714 account. The deposit is to earn interest comp
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$14,022 $14,338 $14,661 $14,990 $15,328 $15,673 $16,025 $16,386 $16,754 $17,131 $17,517 $17,911 $18,314 $18,726 $19,147 $19,578 $20,019 $20,469 $20,930 $21,401 $21,882 $22,375 $22,375 ve annual yields? Annual Yield 6% Annual yield 9.3%
pounded annually at the rate of 6 percent for
seven years
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Would you prefer making a $25,000 investme monthly or making the same $25,000 investm 1st Scenario (Co Investment $25,000 Rate 7% Years 1 Year Deposit Interest 0 $25,000 $0 1 $1,750 Formula 2nd Scenario (Co Investment $25,000 Rate 6% Months 12 Month Deposit Interest 0 $25,000 $0 1 $125 2 $126 3 $126 4 $127 5 $128 6 $128 7 $129 8 $129 9 $130 10 $131 11 $131 12 $132 Formula In this situation it's better to go with the scenario
ent that will earn interest at the rate of 6 per ment at 7 percent compounded annually? ompunded Annually) Balance $25,000 $26,750 $26,750.00 ompounded Monthly) Balance $25,000 $25,125 $25,251 $25,377 $25,504 $25,631 $25,759 $25,888 $26,018 $26,148 $26,279 $26,410 $26,542 $26,542 o 1 because even though the rate is compounded an
rcent compounded nnually but the higher rate gives you more return o
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on your Investment
Jones can deposit $5,000 at the end of each an annual rate of 8 percent, compounded sem If the deposits were made at the beginning o At the end of ea Investment $5,000 every 6 months Rate 8% Years 12 6 month Period Deposit Interest 0 $0 $0 1 $5,000 $0 2 $5,000 $200 3 $5,000 $408 4 $5,000 $624 5 $5,000 $849 6 $5,000 $1,083 7 $5,000 $1,327 8 $5,000 $1,580 9 $5,000 $1,843 10 $5,000 $2,117 11 $5,000 $2,401 12 $5,000 $2,697 13 $5,000 $3,005 14 $5,000 $3,325 15 $5,000 $3,658 16 $5,000 $4,005 17 $5,000 $4,365 18 $5,000 $4,740 19 $5,000 $5,129 20 $5,000 $5,534 21 $5,000 $5,956 22 $5,000 $6,394 23 $5,000 $6,850 24 $5,000 $7,324 Formula At the beginning
Investment $5,000 Beginning of each period Rate 8% Years 12 6 month Period Deposit Interest 0 $5,000 $0 1 $5,000 $200 2 $5,000 $408 3 $5,000 $624 4 $5,000 $849 5 $5,000 $1,083 6 $5,000 $1,327 7 $5,000 $1,580 8 $5,000 $1,843 9 $5,000 $2,117 10 $5,000 $2,401 11 $5,000 $2,697 12 $5,000 $3,005 13 $5,000 $3,325 14 $5,000 $3,658 15 $5,000 $4,005 16 $5,000 $4,365 17 $5,000 $4,740 18 $5,000 $5,129 19 $5,000 $5,534 20 $5,000 $5,956 21 $5,000 $6,394 22 $5,000 $6,850 23 $5,000 $7,324 24 $5,000 $7,817 Formula
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six-month period for the next 12 years and ea miannually. What will the value of the investm of each year, what would the value of the inve ach period Balance $0 $5,000 $10,200 $15,608 $21,232 $27,082 $33,165 $39,491 $46,071 $52,914 $60,031 $67,432 $75,129 $83,134 $91,460 $100,118 $109,123 $118,488 $128,227 $138,356 $148,890 $159,846 $171,240 $183,089 $195,413 $195,413 g of each period
Balance $5,000 $10,200 $15,608 $21,232 $27,082 $33,165 $39,491 $46,071 $52,914 $60,031 $67,432 $75,129 $83,134 $91,460 $100,118 $109,123 $118,488 $128,227 $138,356 $148,890 $159,846 $171,240 $183,089 $195,413 $208,230 $208,230
arn interest at ment be after 12 years? estment be after 12 years?
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Suppose you deposit $1,250 at the end of ea 10 percent compounded quarterly. How muc Investment 1,250 per period Rate 10.0% Years 4 Quarter Deposit Interest 0 - 1 1,250 - 2 1,250 31 3 1,250 63 4 1,250 96 5 1,250 130 6 1,250 164 7 1,250 200 8 1,250 236 9 1,250 273 10 1,250 311 11 1,250 350 12 1,250 390 13 1,250 431 14 1,250 473 15 1,250 516 16 1,250 560 formula
ach quarter in an account that will earn intere ch will you have at the end of four years? Balance 1,250 2,531 3,845 5,191 6,570 7,985 9,434 10,920 12,443 14,004 15,604 17,244 18,926 20,649 22,415 24,225 24,225
est at an annual rate of
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Suppose you deposit $2,500 at the end of ye year 3, and $1,300 at the end of year 4. Assu Investment X per period Rate 15.0% Years 5 Year Deposit Interest 0 - 1 2,500 - 2 - 375 3 750 431 4 1,300 608 5 - 895 annual rate of 15 percent, how much will you have on depos
ear 1, nothing at the end of year 2, $750 at th uming that these amounts will be compounde Balance 2,500 2,875 4,056 5,965 6,859 sit at the end of five years?
he end of ed at an
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Investment 100,000 Rate Unknown Years 5 Month Deposit Withdrawals 1/1 100,000 2/1 - 1,600 3/1 - 1,600 4/1 - 1,600 5/1 - 1,600 6/1 - 1,600 7/1 - 1,600 8/1 - 1,600 9/1 - 1,600 10/1 - 1,600 11/1 - 1,600 12/1 - 1,600 1/1 - 1,600 2/1 - 1,600 3/1 - 1,600 4/1 - 1,600 5/1 - 1,600 6/1 - 1,600 7/1 - 1,600 8/1 - 1,600 9/1 - 1,600 10/1 - 1,600 11/1 - 1,600 12/1 - 1,600 1/1 - 1,600 2/1 - 1,600 3/1 - 1,600 4/1 - 1,600 5/1 - 1,600 6/1 - 1,600 A pension fund is making an investment of $1 $1,600 at the end of each month for the next fi the capital investment of $100,000 will be re return compounded annually
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7/1 - 1,600 8/1 - 1,600 9/1 - 1,600 10/1 - 1,600 11/1 - 1,600 12/1 - 1,600 1/1 - 1,600 2/1 - 1,600 3/1 - 1,600 4/1 - 1,600 5/1 - 1,600 6/1 - 1,600 7/1 - 1,600 8/1 - 1,600 9/1 - 1,600 10/1 - 1,600 11/1 - 1,600 12/1 - 1,600 1/1 - 1,600 2/1 - 1,600 3/1 - 1,600 4/1 - 1,600 5/1 - 1,600 6/1 - 1,600 7/1 - 1,600 8/1 - 1,600 9/1 - 1,600 10/1 - 1,600 11/1 - 1,600 12/1 - 1,600 1/1 - 101,600 Formula 1.60% IRR Formula 20.98% XIRR
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Net Cash Flow (100,000) 1,600 1,600 1,600 1,600 1,600 1,600 1,600 1,600 1,600 1,600 1,600 1,600 1,600 1,600 1,600 1,600 1,600 1,600 1,600 1,600 1,600 1,600 1,600 1,600 1,600 1,600 1,600 1,600 1,600 100,000 today and expects to receive five years. At the end of the fifth year, eturned. What is the internal rate of on this investment?
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1,600 1,600 1,600 1,600 1,600 1,600 1,600 1,600 1,600 1,600 1,600 1,600 1,600 1,600 1,600 1,600 1,600 1,600 1,600 1,600 1,600 1,600 1,600 1,600 1,600 1,600 1,600 1,600 1,600 1,600 101,600
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a. Will this investment be p Investment 13,000 Rate xx Years 6 Year Deposit Withdrawals Ne 0 13,000 1 5,000 2 1,000 3 - 4 5,000 5 6,000 6 864 In this situation the investment will be profi b. What will be the IRR (compounded annu Investment 13,000 Rate xx Years 6 Year Deposit Withdrawals Ne 0 13,000 1 5,000 2 1,000 3 - 4 5,000 5 6,000 An investment is expected to produce the f flows: year 1: $5,000 year 4 year 2: $1,000 year 5 year 3: $0 year 6: $ The investment will cost $1
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6 864 Investment 13,000 Rate 10.0% Years 7 Interest Year Deposit Earned 0 13,000 1 1,300 2 930 3 923 4 1,015 6 617 7 79 c. Prove your answer in (b) by showing how much of ea $13,000 investment and how much of the cash
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profitable? et Cash Flow (13,000) 5,000 1,000 - 5,000 6,000 864 $ 4,864 fitable ually) on this investment? et Cash Flow (13,000) 5,000 1,000 - 5,000 6,000 following annual year-end cash 4: $5,000 5: $6,000 $863.65 13,000 today.
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864 Formula IRR 10% $ 4,864 Withdrawal Interest Principal Total Principal Balance 1,300 3,700 5,000 9,300 930 70 1,000 9,230 - - 10,153 1,938 3,062 5,000 6,168 617 5,383 6,000 785 79 785 864 (0) 13,000 ach year’s cash flow is recovery of the h flow is return on investment.
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