Answer the following questions:a. Assuming a rate of 10% annually, find the FV of $1,000 after 5 years.b. What is the investment’s FV at rates of 0%, 5%, and 20% after 0, 1, 2, 3, 4, and 5 years?c. Find the PV of $1,000 due in 5 years if the discount rate is 10%.d. What is the rate of return on a security that costs $1,000 and returns $2,000 after 5 years?e. Suppose California’s population is 36.5 million people and its population is expectedto grow by 2% annually. How long will it take for the population to double?f. Find the PV of an ordinary annuity that pays $1,000 each of the next 5 years if theinterestrate is 15%. What is the annuity’s FV?g. How will the PV and FV of the annuity in part f change if it is an annuity due?h. What will the FV and the PV be for $1,000 due in 5 years if the interest rate is 10%,semiannual compounding? i. What will the annual payments be for an ordinary annuity for 10 years with a PV of$1,000 if the interest rate is 8%? What will the payments be if this is an annuity due?j. Find the PV and the FV of an investment that pays 8% annually and makes the followingend-of-year payments:0 ___________1__________ 2___________ 3 $100 $200 $400k. Five banks offer nominal rates of 6% on deposits, but A pays interest annually, B payssemiannually, C pays quarterly, D pays monthly, and E pays daily.1. What effective annual rate does each bank pay? If you deposit $5,000 in each banktoday, how much will you have in each bank at the end of 1 year? 2 years?2. If all of the banks are insured by the government (the FDIC) and thus are equallyrisky, will they be equally able to attract funds? If not (and the TVM is the onlyconsideration), what nominal rate will cause all of the banks to provide the sameeffective annual rate as Bank A?3. Suppose you don’t have the $5,000 but need it at the end of 1 year. You plan tomake a series of deposits—annually for A, semiannually for B, quarterly for C,monthly for D, and daily for E—with payments beginning today. How large mustthe payments be to each bank?4. Even if the five banks provided the same effective annual rate, would a rationalinvestor be indifferent between the banks? Explain.l. Suppose you borrow $15,000. The loan’s annual interest rate is 8%, and it requiresfour equal end-of-year payments. Set up an amortization schedule that shows theannual payments, interest payments, principal repayments, and beginning andending loan balances.
Answer the following questions:
a. Assuming a rate of 10% annually, find the FV of $1,000 after 5 years.
b. What is the investment’s FV at rates of 0%, 5%, and 20% after 0, 1, 2, 3, 4, and 5 years?
c. Find the PV of $1,000 due in 5 years if the discount rate is 10%.
d. What is the
e. Suppose California’s population is 36.5 million people and its population is expected
to grow by 2% annually. How long will it take for the population to double?
f. Find the PV of an ordinary
interest
rate is 15%. What is the annuity’s FV?
g. How will the PV and FV of the annuity in part f change if it is an annuity due?
h. What will the FV and the PV be for $1,000 due in 5 years if the interest rate is 10%,
semiannual compounding?
i. What will the annual payments be for an ordinary annuity for 10 years with a PV of
$1,000 if the interest rate is 8%? What will the payments be if this is an annuity due?
j. Find the PV and the FV of an investment that pays 8% annually and makes the following
end-of-year payments:
0 ___________1__________ 2___________ 3
$100 $200 $400
k. Five banks offer nominal rates of 6% on deposits, but A pays interest annually, B pays
semiannually, C pays quarterly, D pays monthly, and E pays daily.
1. What effective annual rate does each bank pay? If you deposit $5,000 in each bank
today, how much will you have in each bank at the end of 1 year? 2 years?
2. If all of the banks are insured by the government (the FDIC) and thus are equally
risky, will they be equally able to attract funds? If not (and the TVM is the only
consideration), what nominal rate will cause all of the banks to provide the same
effective annual rate as Bank A?
3. Suppose you don’t have the $5,000 but need it at the end of 1 year. You plan to
make a series of deposits—annually for A, semiannually for B, quarterly for C,
monthly for D, and daily for E—with payments beginning today. How large must
the payments be to each bank?
4. Even if the five banks provided the same effective annual rate, would a rational
investor be indifferent between the banks? Explain.
l. Suppose you borrow $15,000. The loan’s annual interest rate is 8%, and it requires
four equal end-of-year payments. Set up an amortization schedule that shows the
annual payments, interest payments, principal repayments, and beginning and
ending loan balances.
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