Question
1.Assume that 1 year from now you plan to deposit $3,000 in a savings account that pays a nominal rate of 9%. a) If the
1.Assume that 1 year from now you plan to deposit $3,000 in a savings account that pays a nominal rate of 9%. a) If the bank compounds interest annually, how much will you have in your account 4 years from now? b) What would your balance be 4 years from now if the bank used quarterly compounding rather than annual compounding?
2.To pay for your child's education, you wish to have accumulated $15,000 at the end of 15 years. a) To do this you plan on depositing an equal amount into the bank at the end of each year. If the bank is willing to pay 6 percent compounded annually, how much must you deposit each year to reach your goal? b) If you plan to deposit an equal amount into another bank at the beginning of each month and the bank is willing to pay 5% compounded monthly, how much must you deposit each month?
3. Construct an amortization schedule for the monthly payments number: 1, 10, 32, 128, 180 and 240 required on a 20 year, $820,000 mortgage that has an interest rate of 13% per annum. Show the breakdown of monthly payments into principal versus interest.
4. Sarah would like to make a single investment and have $2 million at the time of her retirement in 35 years. She has found a mutual fund that will earn 4 percent annually. How much will Sarah have to invest today? What if Sarah were a finance major and learned how to earn a 14 percent annual return, how much would she have to invest today?
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