Suppose you invest $5,000 for 5 years. The interest rate for the first 2 years is...
Suppose you invest $5,000 for 5 years. The interest rate for the first 2 years is 4.7%, 5.2% for year 3 and 5.4% for the final 2 years. Assuming interest compounds annually, what would your investment have returned in those 5 years?
Homework Answers
Present Value = $5,000
Future Value = PV(1 + r)^n
Future Value = 5,000(1.047)²(1.052)(1.054)²
Future Value = $6,405.61
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Suppose you invest $5,000 for 5 years. The interest rate
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5. You have two opportunities to invest $5,000 for 10 years. The first provides a yield of 8% annually, compounded quarterly. The second provides a yield of 8.5% annually, compounded annually. Which of these investments provides the highest returns? By how much? 6. Which would you prefer -- $10,000 now, $20,000 10 years from now, or $30,000 20 years from now, assuming a. a 6% annual interest rate? b. an 8% annual interest rate? c. a 10% annual interest rate?...
Exercise 2: Suppose you invest $2,500 in a bank at the rate of 14 percent per...
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Problem 1.8 You deposit $5,000 in an account earning 5% interest compounded semi-annually for 2 years...
Problem 1.8 You deposit $5,000 in an account earning 5% interest compounded semi-annually for 2 years and 7% interest compounded quarterly thereafter. What is the account value after 7 years? Problem 1.9 What is the equivalent effective annual (compound) interest rate in Problem 1.8? Problem 1.10 You deposit $5,000 in an account that earns 5% interest compounded annually in years 1 and 2, and thereafter a continuous rate δ(t) = 2/(t + 1) (t > 0). What is the value...
Problem 1.8 You deposit $5,000 in an account earning 5% interest compounded semi-annually for 2 years...
Problem 1.8 You deposit $5,000 in an account earning 5% interest compounded semi-annually for 2 years and 7% interest compounded quarterly thereafter. What is the account value after 7 years? Problem 1.9 What is the equivalent effective annual (compound) interest rate in Problem 1.8? Problem 1.10 You deposit $5,000 in an account that earns 5% interest compounded annually in years 1 and 2, and thereafter a continuous rate δ(t) = 2/(t + 1) (t > 0). What is the value...
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Question 2. (12 pts) You have extra $5,000 to invest. You do not need the money...
Question 2. (12 pts) You have extra $5,000 to invest. You do not need the money now but will need it after 3 years, so you plan to cash your investment at the end of 3 year. Usually your investments earn 7% annual interest compounded annually and you'd like to consider it as your minimum acceptable rate of return. You are considering several investment opportunities: Option 1. Depositing your money on the high interest savings account that earns 0.58% interest...
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Suppose you invest $1,000 in a financial asset earning an annual interest rate of 6%. How...
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You have the opportunity to invest $5,000 today and receive risk free payments of $4,000 at...
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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 investment in six years? Exercise 3: Suppose you're 22 years old now, in order to have $1,000,000 when you're retired (60 ye old), how much that you need to save money from now? (Assuming that interest rate is fixed at 12% year) Exercise 2: Suppose you invest $2,500 in a bank at the rate of...
Problem 1.8 You deposit $5,000 in an account earning 5% interest compounded semi-annually for 2 years and 7% interest compounded quarterly thereafter. What is the account value after 7 years? Problem 1.9 What is the equivalent effective annual (compound) interest rate in Problem 1.8? Problem 1.10 You deposit $5,000 in an account that earns 5% interest compounded annually in years 1 and 2, and thereafter a continuous rate δ(t) = 2/(t + 1) (t > 0). What is the value...
Problem 1.8 You deposit $5,000 in an account earning 5% interest compounded semi-annually for 2 years and 7% interest compounded quarterly thereafter. What is the account value after 7 years? Problem 1.9 What is the equivalent effective annual (compound) interest rate in Problem 1.8? Problem 1.10 You deposit $5,000 in an account that earns 5% interest compounded annually in years 1 and 2, and thereafter a continuous rate δ(t) = 2/(t + 1) (t > 0). What is the value...
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