1) You have decided to put a $100 a week into a savings account that offers 2.6%
ID: 2774511 • Letter: 1
Question
1) You have decided to put a $100 a week into a savings account that offers 2.6% compounded weekly. How much would you have in your account after 6 years? Answer: _________________________
2) Using problem 2 how much would you have if you were to make your first payment today, i.e. made it into an annuity due problem? Answer: _________________________
3) Your child was born today and you have decided to put money into his education fund starting today (annuity due). Your account earns 4.5% compounded monthly. If you want there to be $200,000 for him in the account on his 18th birthday how much do you have to contribute every month? Answer: _________________________
4) What is the combined present value of $5,000 to be received in 5 years, $15,000 to be received in 10 years, and $25,000 to be received in 15 years with an interest rate of 9.0%? Answer: _________________________
5) Your parents have decided they want to put money away today so that beginning on your 45 th birthday that you get $10,000 for 35 years. Today you turned 21. If your parents account guarantees 8.80%, how much money do they need to put in the account today? Answer: _________________________
6) What is the present value of a perpetuity that pays $2,500 a year, if we expect interest rates to be 12.75% forever? Answer: _________________________
Explanation / Answer
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PV=719 FV=938.50 No of Periods= 10 years FV=PV*(1+i)^n 938.50=719*(1+i)^10 938.50/719=(1+i)^10 1.30528512^(1/10)=1+i 1.027-1= i i=0.027= 2.7%Related Questions
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