Answered step by step
Verified Expert Solution
Question
1 Approved Answer
*Additional instruction for bonus problems: For each problem, you need to draw suitable cashflow diagram(s) (like what I demonstrated in class) to support your answers.
*Additional instruction for bonus problems: For each problem, you need to draw suitable cashflow diagram(s) (like what I demonstrated in class) to support your answers. Bonus Problem 1 (Optional, 30 marks) There are two investment funds A and B. Fund A earns interest at annual nominal interest 18% compounded semi-annually and Fund B earns interest at annual nominal interest 18% convertible m-thly. Mr. A deposits $650 into fund A at the beginning of every quarter for 10 years. The first deposit is made today. Mr. B deposits $650 into fund B at the beginning of every quarter during the first 5 years and deposits X (where X > 650) into fund B at the beginning of each quarter in the next 5 years. The first deposit is made today. Question: Suppose that the amount values of two accounts (Mr. A account and Mr. B account) at the end of 15th year are the same, find the total amount of interest earned by Mr. B account over the 15 years. (Hint: Find the value of m first. To do this, you can think about the amount of interest earned from each of these two accounts.) *Additional instruction for bonus problems: For each problem, you need to draw suitable cashflow diagram(s) (like what I demonstrated in class) to support your answers. Bonus Problem 1 (Optional, 30 marks) There are two investment funds A and B. Fund A earns interest at annual nominal interest 18% compounded semi-annually and Fund B earns interest at annual nominal interest 18% convertible m-thly. Mr. A deposits $650 into fund A at the beginning of every quarter for 10 years. The first deposit is made today. Mr. B deposits $650 into fund B at the beginning of every quarter during the first 5 years and deposits X (where X > 650) into fund B at the beginning of each quarter in the next 5 years. The first deposit is made today. Question: Suppose that the amount values of two accounts (Mr. A account and Mr. B account) at the end of 15th year are the same, find the total amount of interest earned by Mr. B account over the 15 years. (Hint: Find the value of m first. To do this, you can think about the amount of interest earned from each of these two accounts.)
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started