Question
Exercise 1: Let's say you've just turned 20. Your wealthy grandparents set up a trust fund for you so that you would receive $140,000 by
Exercise 1: Let's say you've just turned 20. Your wealthy grandparents set up a trust fund for you so that you would receive $140,000 by age 35. If the discount rate is 8%, what is the value of the fund today? We offer you an investment of 10% per year. If you invest $15,000, how long will it take to get $30,000? In 1867, Mr. George Edward Lee found an astrolabe (a 17th century navigational tool) that Samuel de Champlain had lost on his land in Ontario. Mr. Lee sold the astrolabe to a stranger for $12. In 1989, the Canadian Museum of Civilization purchased the astrolabe for $250,000 from its then-owner, the New York Historical Society (where it had ended up after many adventures). Obviously, Mr. Lee had been scammed. Imagine, however, that he had invested his $10 to 10%. How much would this sum be worth in 2021? (2 points). You put $6000 in a bank. The annual continuous capitalization interest rate is 10%. What will be the value of this deposit after 5 years? . What is the present value of $2,000 to be received in 4 years if the nominal rate with continuous capitalization is 8%?
Exercise 2: Points 1.1 and 1.2 are independent Nominal rate of 24% capitalized semi-annually; Nominal rate of 24% capitalized monthly; Nominal rate of 24% capitalized quarterly; Annual effective rate of 25%; Nominal rate of 23% capitalized monthly; Nominal rate of 22.5% on a continuous capitalization basis. Which of the following rates is best for the borrower? Which of the following rates is best for the lender? You deposit $950 at a financial institution at the beginning of each quarter for 30 quarters. How much money would you have in 10 years if the semi-annual capitalized nominal interest rate offered is 10%?
Exercise 3: Points a and b are independent You invest $20,000 at a nominal rate of 8% capitalized semi-annually for a period of 10 years. Determine the total amount of interest earned between the beginning of year 5 and the end of year 9. What will be the accumulated value in 10 years of the next installment series? $1,500 to be paid at the end of Year 2; $1,000 to be paid in 3 years and 7 months; $3,500 to be paid in 8 years and 4 months
The annual effective interest rate is 10%.
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