Suppose 5,000 are deposited in an account that earns 5% interest compounded semi

Question

Suppose 5,000 are deposited in an account that earns 5% interest compounded semiannually. You retire 20 per year How much money will there be in the account after 25 years? If you have $20,000, what is the annual equivalent in 30 years if you earn: 2% annually? 2% per quarter compounded monthly? 2% compound monthly? You receive $10,000 every five years, $2,000 every two years, $1,000 every year, and $500 per month for the first 100 years. Find the year zero equivalent for this cash flow if the interest rate is 24% compounded monthly. You purchase a car that is $29,000 and give $3,000 as a down payment. What is the monthly payment if the APR is 5% and the compounding period is monthly. Which one is greater, $250,000 in year 30 or $1,700 per month using a 6% interest compounded monthly. Show all your work.

Explanation / Answer

per the rule, I can answer first question only.

We have:

PV =5000

Rate per compounding r= 5%/2 = 2.5%

No. of compounding n = 25x2 =50

We have the following formula for FV:

FV = PV x(1+r)^n

FV = 5000 x(1+0.025)^50

FV =5000 x 3.43711

     = 17185.55

Therefore, after 25 years there will be 17185.55 .

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