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Exercise 2: Suppose you invest $2,500 in a bank at the rate of 14 percent per year. What will be the future value of your inv

Exercise 2: Suppose you invest $2,500 in a bank at the rate of 14 percent per year. What will be the future value of your inv

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Answer #1

Question 2.

Year opening bal. Intrest@14%. Closing balance

1. 2500. 350. 2850

2. 2850. 399. 3249

3. 3249. 455. 3704

4. 3704. 519. 4223

5. 4223. 591 4814

6. 4814 674. 5488

Value of investment at end of Six years = $ 5488

Question 3

Amount to have at end of 60years = $ 1,000,000

Amount to be invested today in order to get 1,000,000 after 60 years @ 12% per annum

=Amount /(1.00+rate of intrest) power no.of years

=1000,000/(1.00+0.12)^{38}

=1,000,000/74.1797

=$ 13,480

1. 000,000/1.00 +0.12)

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