Problem 6: You are trying to explain to a friend the power of compound interest. So you use the following example: You will invest $500 into two bank accounts which each pay 6% interest per year, but the first (Account A) pays simple interest and the second (Account B) pays the interest compounded yearly. a) How much is in each account after 3 years? b) Use the table below to demonstrate the difference between simple and compound interest BANK ACCOUNT A Amount in Account S500 BANK ACCOUNTB Amount in Account S500 Year Yer
Problem 6: You are trying to explain to a friend the power of compound interest. So you use the following example: You will invest $500 into two bank accounts which each pay 6% interest per year, but the first (Account A) pays simple interest and the second (Account B) pays the interest compounded yearly. a) How much is in each account after 3 years? b) Use the table below to demonstrate the difference between simple and compound interest BANK ACCOUNT A Amount in Account S500 BANK ACCOUNTB Amount in Account S500 Year Yer
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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Problem 6: You are trying to explain to a friend the power of compound interest. So you use the
following example: You will invest $500 into two bank accounts which each pay 6% interest per year,
but the first (Account A) pays simple interest and the second (Account B) pays the interest compounded
yearly.
a) How much is in each account after 3 vears?
b) Use the table below to demonstrate the difference between simple and compound interest
BANK ACCOUNT A
Amount in Account
BẠNK ACCOUNTB
Amount in Account
S500
Year
Year
3
Problem 7: Many people struggle over the decision of acquiring a vehicle. Usually the three main
choices involve buying a used vehicle, buying a new vehicle or leasing a new vehicle.
a) In the table below provide two positive aspects (pros) and two negative aspects (cons) for each of the
options.
Buying Used
Buying New
Leasing New
Pros
Cons
b) You own a car that consumes diesel fuel at a rate of 6.7L/100km. On a 2500km trip to the East Coast
you estimate that the average fuel price will be $0.93/L. What willl be your estimated fuel cost to drive
the 2500km trip?
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