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Homework Answers
i=9%, compounded daily i.e. 9%/360=0.025% daily or 9.416% EAR
i=9%, compounded semi annually i.e (1+9%/2)^2-1 or 9.202% EAR
i=9%, compounded continuously i.e e^(9%)-1 or 9.417% EAR
i=9%, compounded monthly i.e (1+9%/12)^12-1 or 9.38% EAR
Cash Deposited at t=0, after end of 1 month value= 1350+1350*9.416%/12+975(new cash)=$2335.59
Below is the calculation sheet for the year:
| Month | Old Cash Balance | Cash Deposited | New Deposit+Old Deposit | Next Month Interest | TOTAL |
| 0 | 0 | 1350 | 1350 | 10.59322234 | 1360.593222 |
| 1 | 1360.593222 | 975 | 2335.593222 | 18.32700615 | 2353.920228 |
| 2 | 2353.920228 | 600 | 2953.920228 | 22.65287575 | 2976.573104 |
| 3 | 2976.573104 | 600 | 3576.573104 | 27.42784499 | 3604.000949 |
| 4 | 3604.000949 | 1215 | 4819.000949 | 36.95571353 | 4855.956663 |
| 5 | 4855.956663 | 1215 | 6070.956663 | 46.55664891 | 6117.513312 |
| 6 | 6117.513312 | 1215 | 7332.513312 | 57.54451574 | 7390.057827 |
| 7 | 7390.057827 | 1350 | 8740.057827 | 68.59072379 | 8808.648551 |
| 8 | 8808.648551 | 1500 | 10308.64855 | 80.90079944 | 10389.54935 |
| 9 | 10389.54935 | 1500 | 11889.54935 | 92.94347827 | 11982.49283 |
| 10 | 11982.49283 | 1500 | 13482.49283 | 105.3959021 | 13587.88873 |
| 11 | 13587.88873 | 1300 | 14887.88873 | 116.3822212 | 15004.27095 |
| 12 | 15004.27095 | 1300 | 16304.27095 | 127.4544231 | 16431.72538 |
So, Value of deposit at the end of 1 year=$16431.72
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