(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
Related questions
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](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F10c7525c-c416-4320-97b0-471febd6b171%2Fdbdee26f-864c-41df-9af5-20285f40516a%2Fn6ho30g_processed.jpeg&w=3840&q=75)
Transcribed Image Text: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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