a) In how many years will a single investment of $1,000 made now, increase to $2,000 if the interest rate is 3% peryear?b) A savings certificate costing $80 now will pay $113.48 in 6 years. What is the effective annual interest rate ifcompounding takes place monthly? And what is the nominal annual interest rate compounded monthly?c) How much money would be accumulated 18 years from now, if an equal amount of money is invested at the endof each year, and if over 30 years the amount of money accumulated would amount to $200,000 and the interestrate is expected to average 4% over the entire time?

Information Provided: Present value = $1000 Future value = $2000 Interest rate = 3% NOTE: As…

Answered: a) In how many years will a single…

a) In how many years will a single investment of $1,000 made now, increase to $2,000 if the interest rate is 3% per year?

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) In how many years will a single investment of $1,000 made now, increase to $2,000 if the interest rate is 3% per
year?
b) A savings certificate costing $80 now will pay $113.48 in 6 years. What is the effective annual interest rate if
compounding takes place monthly? And what is the nominal annual interest rate compounded monthly?
c) How much money would be accumulated 18 years from now, if an equal amount of money is invested at the end
of each year, and if over 30 years the amount of money accumulated would amount to $200,000 and the interest
rate is expected to average 4% over the entire time?

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