(a) A bank account pays 5.5% annual interest, compounded monthly. How long will it take the money to double in this account?(b) An investment offers to double your money in 5 years, what the APR are you being offered Future and Present Value1. FV = C(1+r)"%3D2. PV =(1+r)T3. FV = PV(1 +r)"%3D4. r DPVFVT-1Inv)5. Т-PV%3DIn(1+r)Annuity1. PV = P[1-pmt1(1+r)".PV r2. ртt %3D(1+r)"[In(pmt)-In(pmt-PV•1)]In(1+r)3. Т—pmt4. FV =[(1 +r)"Annuity Duepmt1(1+r)" (1+r)[(1 +r)" – 1](1 +r)5. PV :6. FV =judEAR & APRm1. EAR = (1+4)-12. APR = m[(1+ EAR) – 1]%3Dm

a) monthly rate = 5.5%/12 2 = 1*(1 + 5.5%/12)n where n is the number of months number of months =…

(a) A bank account pays 5.5% annual interest, compounded monthly. How long will it take the money to double in this account? (b) An investment offers to double your money in 5 years, what the APR are you being offered

(a) A bank account pays 5.5% annual interest, compounded monthly. How long will it take the money to double in this account? (b) An investment offers to double your money in 5 years, what the APR are you being offered

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

(a) A bank account pays 5.5% annual interest, compounded monthly. How long will it take the money to double in this account?

(b) An investment offers to double your money in 5 years, what the APR are you being offered

Future and Present Value
1. FV = C(1+r)"
%3D
2. PV =
(1+r)T
3. FV = PV(1 +r)"
%3D
4. r D
PV
FVT
-1
Inv)
5. Т-
PV
%3D
In(1+r)
Annuity
1. PV = P[1-
pmt
1
(1+r)".
PV r
2. ртt %3D
(1+r)"
[In(pmt)-In(pmt-PV•1)]
In(1+r)
3. Т—
pmt
4. FV =[(1 +r)"
Annuity Due
pmt
1
(1+r)" (1+r)
[(1 +r)" – 1](1 +r)
5. PV :
6. FV =
jud
EAR & APR
m
1. EAR = (1+4)-1
2. APR = m[(1+ EAR) – 1]
%3D
m

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