Assume that 1 year from now you plan to deposit €1,000 in a savings account that pays a rate of 8 percent. a. If the bank compounds interest annually how much will you have in your account 4 years from now? b. Suppose you deposited the €1,000 in 4 payments of €250 each at the end of Years 1, 2, 3 and 4. How much would you have in your account at the end of Year 4, based on 8 percent annual compounding? c. Suppose you deposited four equal payments in your account at the end of Years 1, 2, 3 and 4. Assuming an 8 percent interest rate, how large would each of your payments have to be for you to obtain the same ending balance as you calculated in part a?
Assume that 1 year from now you plan to deposit €1,000 in a savings account that pays a rate of 8 percent. a. If the bank compounds interest annually how much will you have in your account 4 years from now? b. Suppose you deposited the €1,000 in 4 payments of €250 each at the end of Years 1, 2, 3 and 4. How much would you have in your account at the end of Year 4, based on 8 percent annual compounding? c. Suppose you deposited four equal payments in your account at the end of Years 1, 2, 3 and 4. Assuming an 8 percent interest rate, how large would each of your payments have to be for you to obtain the same ending balance as you calculated in part a?
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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Assume that 1 year from now you plan to deposit €1,000 in a savings account that pays a rate of 8 percent.
a. If the bank
b. Suppose you deposited the €1,000 in 4 payments of €250 each at the end of Years 1, 2, 3 and 4. How much would you have in your account at the end of Year 4, based on 8 percent annual compounding?
c. Suppose you deposited four equal payments in your account at the end of Years 1, 2, 3 and 4. Assuming an 8 percent interest rate, how large would each of your payments have to be for you to obtain the same ending balance as you calculated in part a?
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