Show your work! For time value of money problems, show your inputs, and tell me
ID: 2713573 • Letter: S
Question
Show your work! For time value of money problems, show your inputs, and tell me what you use for the calculations! No work and its wrong = 0 points!
What is the future value in 5 years of $1,000 deposited today, earning a 6% interest rate annually? Future Value:
Approximately, how many years does it take to double a $2000 investment when interest rates are 9% per year? Years:
A stock investor deposited $1000 three years ago in a non-dividend paying stock. Today the stock is valued at $804. What annual rate of return has this investor earned?
Explanation / Answer
Ans-
Amount deposited $1000
Year 5
Interest 6%
Total Interest=Amount Deposited* Time *rate/100
=1000*5*6/100
=$300
Future value=Amount Deposited +Total interest
=1000+300
Amount Investment $2000
Future Value(2000*2)$4000
Interest (4000-2000)$2000
Interest rate 9%
Time=Interest*100/(amount deposited*rate)
=2000*100/(2000*9)
=11.11 years
Amount deposited $1000
Interest earned $804
Time 3years
Rate of return=804*100/(3*1000)
=26.8%
=11.11 years
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