Question

4) If the card's interest rate from problem 3 above is later changed as 3.5% per quarter, find the effective semiannual and annual rates. a) 7.12%, 17.5% b) 7.12%, 14.75% c) 7%, 17.5% d) 7%, 12.5% 5) Pablo wants to help children in need because he's an awesome guy. He will deposit $1000 now, $3000 4 years from now, and $1500 6 years from now. Earning at a rate of 11.7% per year, compounded semiannually, what amount can he donate to the children 10 years from now? a) $11.6K b) $13.4K c) $9.2K d) $21.1k 6) Given: i. A deposit of $1k every month for 5 years ii. 40.0% interest per year iii. Compounding period is per quarter Find: Amount in the account at the end of 5 years with no interperiod compounding a) $150K b) $172K c) $89K d) $222K

Answer 1

4)

A card's interest rate is 3.5% per quarter
Effective semi annual interest rate
Let the Principal be $100
First quarter Interest will be 100*.035 -100=	3.5
Second quarter will be 103.5*.035=	3.6225
Semiannual Interest will	7.1225
Third Quarter interest will be 107.1225*.035	3.749288
Fourth quarter interest will be (107.1225+3.749288)*.035	3.880513
Annual Interest Rate	14.7523

The answer is (b)

5)

Pablo Deposits $1000 now for 10 years at 11.7% compounded semi anually
The Amount formula will be A= P(1+r/100)^n
If compounded semiannually A=P(1+r/200)^2n
There $1000 deposited now willbecome
1000*(1+11.7/200)^20	3117.577	A
A sum of $3000 deposited   4 years from now will stay invested for 6 years
Using the formula above with changing n to 6 the amount will be
3000(1+11.7/200)^12	5934.875	B
A sum of $1500 deposited   6 years from now will stay invested for 4 years
Using the formula above with changing n to 4, the amount will be
1500(1+11.7/200)^8	2363.84	C
Tte total sum available to Pablo will A+ B+C	11416.29

The answer is a)

6)

A sum of $1000 every month for 5 years compounded quarterly at 40% will bed given by the formula
Pmt *( 1+ Int/period)^n*period/int/period
Here Payment is $1000 permonth or $ 3000 per quarter	3000
Int is 40% compounded quarterly will be	10%
N will 5 years or 5X4 periods	20
Future value will be
3000*((1.1)^20-1)/.1	171825

The answer is b