1. First City Bank pays 7 percent simple interest on its savings account balances, where Second City Bank pay 7 percent interest compounded annually. If you made a P5,000 deposit in each bank, how much more money would you earn from your Second City Bank account at the end of 10 years?
1. First City Bank pays 7 percent simple interest on its savings account balances, where Second City Bank pay 7 percent interest compounded annually. If you made a P5,000 deposit in each bank, how much more money would you earn from your Second City Bank account at the end of 10 years?
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Transcribed Image Text:1. First City Bank pays 7 percent simple interest on its savings account balances, where
Second City Bank pay 7 percent interest compounded annually. If you made a P5,000
deposit in each bank, how much more money would you earn from your Second City
Bank account at the end of 10 years?
2. For each of the following, compute the future value.
Present Value
Years
Interest Rate
Future Value
P
2,250
9,310
76,355
183,796
19
10%
13
8%
4
22%
8
7%
3. For each of the following, compute the present value.
Interest Rate
5%
Present Value
Year
Future Value
ITE
Р 15,451
51,557
886,073
550,164
6.
9.
11%
23
16%
18
19%
4. Assume the total cost of a college education will be P250,000 when your child enters
college in 18 years. You presently have P43,000 to invest. What annual rate of interest
must you earn on your investment to cover the cost of your child's college education?
5. Imprudential, Inc. has an unfunded pension liability of P800,000,000 that must be paid
in 20 years. To assess the value of the firm's stock, financial analysts want to discount this
liability back to the present. If the relevant discount rate is 9.5 percent, what is the present
value of this liability?
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