PERSONAL FINANCE ETEXT TURNING MONEY
PERSONAL FINANCE ETEXT TURNING MONEY
8th Edition
ISBN: 9780136879015
Author: KEOWN
Publisher: PEARSON
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Chapter 1, Problem 9PA
Summary Introduction

To discuss:

Importance of principle 5 and principle 7 and their correlation.

Introduction:

Principle 5 tells about the importance of the liquidity because future is uncertain and one may needs fund anytime, so some fund should be liquid so one can use it when required.

Principle 7 tells that sometime major catastrophes happen and in order to protect yourself one should have enough funds or should take insurance to cover that.

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It is now January 1. You plan to make a total of 5 deposits of $500 each, one every 6 months, with the first payment being made today. The bank pays a nominal interest rate of 14% but uses semiannual compounding. You plan to leave the money in the bank for 10 years. Round your answers to the nearest cent. 1. How much will be in your account after 10 years? 2. You must make a payment of $1,280.02 in 10 years. To get the money for this payment, you will make five equal deposits, beginning today and for the following 4 quarters, in a bank that pays a nominal interest rate of 14% with quarterly compounding. How large must each of the five payments be?
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