An investor knows that she will need £20,000 in ten years and looks at possible savings plans. The interest rate is 3% p.a. effective. (a) She deposits £5,000 in a savings account at time zero. From the beginning of the sixth year onwards she makes monthly payments in arrears into the same account. Find the amount Z of the monthly payments. (b) For five years she pays continuously into a savings account at a rate of £500 per year. At the beginning of the sixth year she starts making yearly payments. Such payments are due at the start of each year and they increase by 10% effective p.a. Find the amount W of the first yearly payment.
An investor knows that she will need £20,000 in ten years and looks at possible savings plans. The interest rate is 3% p.a. effective. (a) She deposits £5,000 in a savings account at time zero. From the beginning of the sixth year onwards she makes monthly payments in arrears into the same account. Find the amount Z of the monthly payments. (b) For five years she pays continuously into a savings account at a rate of £500 per year. At the beginning of the sixth year she starts making yearly payments. Such payments are due at the start of each year and they increase by 10% effective p.a. Find the amount W of the first yearly payment.
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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An investor knows that she will need £20,000 in ten years and looks at possible savings plans. The interest rate is 3% p.a. effective.
(a) She deposits £5,000 in a savings account at time zero. From the beginning of the sixth year onwards she makes monthly payments in arrears into the same account. Find the amount Z of the monthly payments.
(b) For five years she pays continuously into a savings account at a rate of £500 per year. At the beginning of the sixth year she starts making yearly payments. Such payments are due at the start of each year and they increase by 10% effective p.a. Find the amount W of the first yearly payment.
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