3 Five Thousand dollars is deposited into an account dht pays 5 96. Yearly; if t

Question

3 Five Thousand dollars is deposited into an account dht pays 5 96. Yearly; if the money remain in the account for three years, The Account Balance would be If? Which one do you recommend? a) Monthly Compound? b) Every six Month Compound? c) Every 2years Compound? d) Simple Interest Rate? e) Continuously Compound? 0e oos 2) 4, For the cash flow diagram shown below for 5 years with 1.0 % per month compound, A- $222 P-? s) a) Compute the value of P? (A+O.an : 51107, 2) b) What is Effective Interest Rate? r2. c) What is the nominal Interest Rate?

Explanation / Answer

SOLUTION 3:

a) A = P(1+r/n)^(n×t) = 5000(1+0.05/12)^(12×3) = $5807.36

b) A = P(1+r/n)^(n×t) = 5000(1+0.05/2)^(2x3) = $5798.47

c) A = P ( 1+r/0.5)^(n/2) = 5000 (1+0.05/0.5)^(3/2) = $5768.448

d) A = P + P×r×t = 5000 + 5000 × 0.05 × 3 = $5750

e) A = P × e^(r×t) = 5000 × e^ ( 0.05 ×3) = $5809.17

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