Question

4) David invested $21,425 in an investment account that will pay him 5.25% (annually) over the next 30 years with monthly compounded interest. How much will he have in his account after 30 years assuming all interest is reinvested? a) $120,197 b) $103,143 c) $36,701 d) $606,533 e) $25,005 5) You bought a house 15 years ago for $300,000 and it is now worth $358,672 according to a recent market report for your neighborhood. What is the average annual rate of appreciation your home has experienced each year for the last 15 years (assume the rate has remained constant)? a) 1.76% b) 1.19% c) 3.25% d) 2.32% e) 0.60 %

Answer 1

4) Monthly interest rate = 5.25%/12 = 0.004375

Number of months = 30 * 12 = 360

FV = 21,425 * (1 + 0.004375)^360

FV = 103,143 (Option B)

5) Annual rate of appreciation = (358,672/300,000)^(1/15) - 1

Annual rate of appreciation = 0.01197957698 ~ 1.19% (Option b)

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