7. All of the following problems involve interest that is being compounded continuously. (a) Compute the interest rate needed in order to double an invest- ment every seven years. (b) With a 10% interest, how long will it take to triple my initial investment. (c) Irvin forgot what is the interest rate at his bank. All he knows is that after five years, his initial investment doubled. When will it triple? (Hint: There are two unknowns; one is the interest rate. Whenever there are two unknowns, two equations are needed. use the information about money at different times in an So, appropriate manner.) (d) A person has money withdrawn from his savings account to be placed in his checking account at a continuous basis. This is at a rate of $10,000 the savings account that has a 5% interest. How much will be in the savings account in one the growth of money needs to be derived. So, start with AM and, instead of the Eq. 2.4 expression, determine what AM equals in this setting. Then, solve the equation.) a year. This person started with $20,000 placed in year? (Hint: A different expression for
7. All of the following problems involve interest that is being compounded continuously. (a) Compute the interest rate needed in order to double an invest- ment every seven years. (b) With a 10% interest, how long will it take to triple my initial investment. (c) Irvin forgot what is the interest rate at his bank. All he knows is that after five years, his initial investment doubled. When will it triple? (Hint: There are two unknowns; one is the interest rate. Whenever there are two unknowns, two equations are needed. use the information about money at different times in an So, appropriate manner.) (d) A person has money withdrawn from his savings account to be placed in his checking account at a continuous basis. This is at a rate of $10,000 the savings account that has a 5% interest. How much will be in the savings account in one the growth of money needs to be derived. So, start with AM and, instead of the Eq. 2.4 expression, determine what AM equals in this setting. Then, solve the equation.) a year. This person started with $20,000 placed in year? (Hint: A different expression for
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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Question
For part d, told to manipulate the equation:
ΔM(t)= rM(t)Δt
M(t) represents the money value at time t
E is the final value of the note
r is the interest rate
Δt is expiration minus today's date
Transcribed Image Text:7. All of the following problems involve interest that is being compounded
continuously.
(a) Compute the interest rate needed in order to double an invest-
ment every seven years.
(b) With a 10% interest, how long will it take to triple my initial
investment.
(c) Irvin forgot what is the interest rate at his bank. All he knows is
that after five years, his initial investment doubled. When will it
triple? (Hint: There are two unknowns; one is the interest rate.
Whenever there are two unknowns, two equations are needed.
use the information about money at different times in an
So,
appropriate manner.)
(d) A person has money withdrawn from his savings account to be
placed in his checking account at a continuous basis. This is at a
rate of $10,000
the savings account that has a 5% interest. How much will be in
the savings account in one
the growth of money needs to be derived. So, start with AM and,
instead of the Eq. 2.4 expression, determine what AM equals in
this setting. Then, solve the equation.)
a year. This person started with $20,000 placed in
year? (Hint: A different expression for
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