Your grandmother just gave you $6,000. You'd like to see how much it might grow if you invest it. a. Calculate the future value of $6,000, given that it will be invested for five years at an annual interest rate of 6 percent. b. Recalculate part a using a compounding period that is (1) semiannual and (2) bimonthly. c. Now let's look at what might happen if you can invest the money at a 12 percent rate rather than a 6 percent rate; recalculate parts a and b for a 12 percent annualinterest rate. d. Now let's see what might happen if you invest the money for 12 years rather than 5 years; recalculate part a using a time horizon of 12 years (the annual interest rate is still 6 percent). e. With respect to the changes in the stated interest rate and the length of time themoney is invested in parts c and d, what conclusions can you draw? USE EXCEL TO WORK THIS OUT AND SHOW THE FORMULA!
Your grandmother just gave you $6,000. You'd like to see how much it might grow if you invest it. a. Calculate the future value of $6,000, given that it will be invested for five years at an annual interest rate of 6 percent. b. Recalculate part a using a compounding period that is (1) semiannual and (2) bimonthly. c. Now let's look at what might happen if you can invest the money at a 12 percent rate rather than a 6 percent rate; recalculate parts a and b for a 12 percent annualinterest rate. d. Now let's see what might happen if you invest the money for 12 years rather than 5 years; recalculate part a using a time horizon of 12 years (the annual interest rate is still 6 percent). e. With respect to the changes in the stated interest rate and the length of time themoney is invested in parts c and d, what conclusions can you draw? USE EXCEL TO WORK THIS OUT AND SHOW THE FORMULA!
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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Question
Your grandmother just gave you $6,000. You'd like to see how much it might grow if you invest it.
a. Calculate the future value of $6,000, given that it will be invested for five years at an annual interest rate of 6 percent.
b. Recalculate part a using a compounding period that is (1) semiannual and (2) bimonthly.
c. Now let's look at what might happen if you can invest the money at a 12 percent rate rather than a 6 percent rate; recalculate parts a and b for a 12 percent annualinterest rate.
d. Now let's see what might happen if you invest the money for 12 years rather than 5 years; recalculate part a using a time horizon of 12 years (the annual interest rate is still 6 percent).
e. With respect to the changes in the stated interest rate and the length of time themoney is invested in parts c and d, what conclusions can you draw?
USE EXCEL TO WORK THIS OUT AND SHOW THE FORMULA!
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