A principal of $20,000 is invested at 6% for 10 years. Determine its future value if the interest is compounded i. Semi-annually (10%) ii. Monthly (10%) iii. Continuously (10%)
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A principal of $20,000 is invested at 6% for 10 years.
Determine its
i. Semi-annually (10%)
ii. Monthly (10%)
iii. Continuously (10%)
iv. Explain, using your own words, the different results in (i), (ii), (iii).
Explain which one the consumer would prefer, and which one the bank would prefer.
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- You have $10,000 to invest. Your bank offers the following 10 year CD's. Account 1 offers 6.85% simple interest. Account 2 offers 6.57% compounded annually. a. How much money will you have at the end of 10 years if Account 1 is chosen? s b. How much money will you have at the end of 10 years if Account 2 is chosen?S Account is the better choice.could you show how to determine the bond's present value without a calculator?Tom Evers an attorney is planning for retirement. He earns $126,000 a year and estimates that he will need 80% of his salary for retirement in 10 years. Tom invests him money in Citizen's Bank at 6% compounded quarterly. How much money would Tom have to put in the bank today to have enough for retirement?
- Problem 3 An investor bought a discount bond with face value of $1,000 at the price of $870. The bond matures in three years. What is the rate of return? Problem 6 You lend $1,000 today. The borrower promises to return $1,500 in 8 years from now. What is the yield to maturity of this loan?6. An individual makes six annual deposits of $2,000 in a savings account that pays interest at a rate of 4% compounded annually. Two years after making the last deposit, the interest rate changes to 7% compounded annually. Ten years after the last deposit the accumulated money is withdrawn from the account. How much is withdrawn?If you borrowed $24,000 at 12% annual interest. You agreed to repay the loan with five equal annual payments. How much of the total amount repaid is interest? How much of the third annual payment is interest, and how much principal is there? If you decided to pay off your loan after the third payment, how much will you pay?
- 22. You deposited $15,000 in a savings account five years ago. The account has earned 5.25% interest compounded continuously since then. How much money is in the account today?When investing or saving money for retirement, which type of interest would benefit the most from? Fixed Variable Simple Compound11. Savannah is buying a $190,000 home. She has been approved for a 3.28% mortgage rate. She was required to make a 20% down payment and will be closing on the house on March 11. Her first mortgage payment is due April 1. C. Determine the annual interest for the mortgage. D. What is the interest charged per day? E. How much should she expect to pay in prepaid interest?
- Whenever the interest charge for any interest period (a year, for example) is based on the remaining principal amount plus any accumulated interest charges up to the beginning of that period, the interest is said to be: a. effective interest b. compound interest c. simple interest d. nominal interest e. none of the choicesYou want to buy a $249,000 home. You plan to pay 5% as a down payment, and take out a 30 year loan for the rest. a) How much is the loan amount going to be? b) What will your monthly payments be if the interest rate is 5% ? c) What will your monthly payments be if the interest rate is 6% ?Showing your working out, compute the price of all four bonds: Face Value Maturity (years) Yield Frequency of yield Coupon rate Frequency of coupon Bond 1 £1000 3 3% semi-annual 8% semi-annual Bond 2 £1000 4 3% quarterly 4% semi-annual Bond 3 £100 2 2% monthly 3% quarterly Bond 4 £100 5 3% monthly 4% semi-annual
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