Question
1.If you need 15,000 in three years, how much will you need to deposit today if you can earn 8 percent per year compounded continuously?
1.If you need 15,000 in three years, how much will you need to deposit today if you can earn 8 percent per year compounded continuously? (10 points)
2.An interest rate is quoted as 5% per annum with semiannual compounding. To result in the same effective rate, what should be the annual percentage rate with (a) annual compounding, (b) monthly compounding, and (c) continuous compounding? (20 points)
3.Today, you are retiring. You have a total of $398,016 in your retirement savings and have the funds invested such that you expect to earn an average annual rate of 7.40 percent, compounded monthly, on this money throughout your retirement years. You want to withdraw $2,500 at the beginning of every month, starting today. How long will it be until you run out of money? (15 points)
4.After deciding to buy a new car, you can either lease the car or purchase it on a three-year loan. The car you wish to buy costs $32,000. The dealer has a special leasing arrangement where you pay $99 today and $450 per month for the next three years. If you purchase the car, you will pay it off in monthly payments over the next three years at a 7 percent APR. You believe you will be able to sell the car for $23,000 in three years. Should you buy or lease the car? (20 points)
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