During a 3-year period when his business was prospering, Jack was able to deposit $1,000 at the end of each month in an account earning 12 percent compounded monthly. The business slackened, and jack could not continue the deposits. Moreover, the interest rate on his accumulated deposits fell to 8 percent compounded quarterly and remained at this level for 10 years, at which time Jack decided to exhaust the account by withdrawing equal amounts at the end of every 6 months for 5 years. The interest rate remained at 8 percent compounded semiannually over the time of the withdrawals. How much did Jack withdraw every 6 months ?
Risk and return
Before understanding the concept of Risk and Return in Financial Management, understanding the two-concept Risk and return individually is necessary.
Capital Asset Pricing Model
Capital asset pricing model, also known as CAPM, shows the relationship between the expected return of the investment and the market at risk. This concept is basically used particularly in the case of stocks or shares. It is also used across finance for pricing assets that have higher risk identity and for evaluating the expected returns for the assets given the risk of those assets and also the cost of capital.
7. During a 3-year period when his business was prospering, Jack was able to deposit $1,000 at the end of each month
in an account earning 12 percent compounded monthly. The business slackened, and jack could not continue
the deposits. Moreover, the interest rate on his accumulated deposits fell to 8 percent compounded quarterly and
remained at this level for 10 years, at which time Jack decided to exhaust the account by withdrawing equal amounts
at the end of every 6 months for 5 years. The interest rate remained at 8 percent compounded semiannually over
the time of the withdrawals. How much did Jack withdraw every 6 months ?
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