1. Suppose that you deposit $600 every 6 months for 5 years into an annuity at 4%...

Question:

1. Suppose that you deposit $600 every 6 months for 5 years into an at 4% interest compounded semiannually. Which of items (a)-(d) can be used to fill in the blank in the statement that follows? (Before computing, use your intuition to guess the correct answer.)
If the _________ doubles, then the amount accumulated will double.
(a) Rent
(b) Interest rate
(c) Number of interest periods per year
(d) Number of years
2. Total Rent Suppose that you deposit $100,000 into an at 4% interest compounded semiannually and withdraw an equal amount at the end of each interest period so that the account is depleted after 10 years. Which of items (a)-(d) can be used to fill in the blank in the statement that follows? (Before computing, use your intuition to guess the correct answer.)
If the ________ doubles, then the total amount withdrawn each year will double.
(a) Amount deposited
(b) Interest rate
(c) Number of interest periods per year
(d) Number of years
3. A municipal bond pays 4% interest compounded semiannually on its of $5000. The interest is paid at the end of every half-year period. Fifteen years from now, the of $5000 will be returned. How much should you pay for the bond?
4. What is the present value of a loan that pays $800 at the end of every quarter for 4 years and pays an additional $10,000 at the end of the 4 years? Assume an interest rate of 3% compounded quarterly.
Annuity
An annuity is a series of equal payment made at equal intervals during a period of time. In other words annuity is a contract between insurer and insurance company in which insurer make a lump-sum payment or a series of payment and, in return,... Face Value
Face value is a financial term used to describe the nominal or dollar value of a security, as stated by its issuer. For stocks, the face value is the original cost of the stock, as listed on the certificate. For bonds, it is the amount paid to the...