In your own words, explain how compounding works. According to therule of 72, if you deposit $100 in an account that pays 9% compoundinterest, how long will it take that initial deposit to reach $200?Use the matrix given below. For each type of investment, record thisinformation: • Is the risk high, moderate, or low? • Is the return high,moderate, or low? • How does this type of investment work? Explainin one or two sentences.

According to Rule of 72, a deposit is doubled in X number of years. That X number of years is…

> In your own words, explain how compounding works. According to the rule of 72, if you deposit $100 in an account that pays 9% compound interest, how long will it take that initial deposit to reach $200?

> In your own words, explain how compounding works. According to the rule of 72, if you deposit $100 in an account that pays 9% compound interest, how long will it take that initial deposit to reach $200?

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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3) Some time ago, you put £500 into a bank account for a “rainy day.” Since then, the bank has been paying you 1 percent per month, compounded monthly. Today, you checked the balance, and found it to be £708.31. How long ago did you deposit the £500?
You deposit $ 70,565 in your account today. You make another deposit at t = 1 of $ 51,167 . How much will there be in your account at the end of year 2 if the interest rate is 19 percent p.a.? (Record your answer without a dollar sign, without commas and round your answer to 2 decimal places; that is, record $3,245.847 as 3245.85). Your Answer:
Use Table 12-1 to solve. Suppose Jorge Otero has set up an annuity due with a certain credit union. At the beginning of each month, $150 is electronically debited from his checking account and placed into a savings account earning 6% interest compounded monthly. What is the value (in $) of Jorge's account after 18 months? (Round your answer to the nearest cent.) $ Submit Answor
If you deposit $700 in a bank account that earns 5 percent per year, how much total interest will you have earned after the third year? (Do not round intermediate calculations. Round your answer to 2 decimal places. (e.g., 32.16)) Total Interest =
11. Suppose you have a balance of $5400 on your credit card, which charges an APR of 18%. If you want to pay off the balance in 18 months, how much should you pay each month? What is the total amount of interest you will end up paying? Assume that you charge no additional expenses to the card. 5400 012
If you earn 5% per year on your bank account, how long will it take an account with $110 to double to $220? (Do not round intermediate calculations. Round your answer to 2 decimal places.)
Solve the problem below. 2. Suppose that your bank has a minimum loan charge of $48 when you borrow at 6% ordinary interest for 90 days. What principal borrowed will result in a $48 interest charge?
Suppose you deposit m dollars the beginning of every month in a savings account that earns a monthly interest rate of r. For an initial investment of m dollars, the amount of money in your account at the beginning of the second month is the sum of your second deposit and your initial deposit plus interest. Denote by An the amount of money in your account in the nth month. 1. Explain why A₁ = m dollars. 2. Explain why A₂ = m+m(1+r) dollars. 3. Write down explicit expressions for A3 and A4. This is the crucial step. 4. Explain why An = m+m(1 + r) + m(1 + r)² + ... +m(1 + r)"−¹ dollars. 5. Use the formula for a geometric sum to show that An = m (1 + r)” − 1 r dollars. 6. If your account has a monthly interest rate r = 0.002 and you deposit $200 monthly for 5 years, how much money will you have in your account after the 5 years? (Hint: How many months?)
If you owe $5,000 on a credit card that charges 18.99% apr and you decide to put no more charges on the account until it is paid off, how much money will you save if you make $200 payments vs $150 payments?
Which do you prefer: a bank account that pays 10% per year (EAR) for 3 years or a. An account that pays 5.0% every 6 months for 3 years? b. An account that pays 15.0% every 18 months for 3 years? c. An account that pays 1.0% per month for 3 years? a. An account that pays 5.0% every 6 months for 3 years? If you deposit $1 into a bank account that pays 10% per year for 3 years, the amount you will receive after 3 years is $ If you deposit $1 into a bank account that pays 5.0% every 6 months for 3 years, the amount you will receive after 3 years is $ (Select from the drop-down menu.) (Round to five decimal places.) Therefore, you will prefer b. An account that pays 15.0% every 18 months for 3 years? If you deposit $1 into a bank account that pays 15.0% every 18 months for 3 years, the amount you will receive after 3 years is $ Therefore, you will prefer (Select from the drop-down menu.) c. An account that pays 1.0% per month for 3 years? If you deposit $1 into a bank account that pays…
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