Question
John Meyers recently graduated from university and has managed to find a job. He is from an economically weak community and has received help from
John Meyers recently graduated from university and has managed to find a job. He is from an economically weak community and has received help from a local charity supported by the city council. John has decided to donate one month's salary to the charity. However, as the charity is well funded right now, he has decided to deposit his one month's salary, 1,800, into an account paying 3.67 percent on the condition that the city cannot collect any money from that account for next 120 years. How much money will the city receive from John's donation in 120 years' time?
5-11. Jake Mai deposited 300,000 in a bank account earning 9 percent per annum. How much interest will he earn in the fourth year? How much of the total will be simple interest and how much will be the result of compound interest?
5-17. You are considering investing in a security that will pay you $1,000 in 30 years.
a. If the appropriate discount rate is 10 percent, what is the present value of this investment?
b. Assume these securities sell for $365, in return for which you receive $1,000 in 30 years. What is the rate of return investors earn on this security if they buy it for $365?
5-19. Yassir Ismail has recently bought some land from a farmer in Africa. The farmer has asked that, in addition to immediate payment, Yassir will also pay $500,000 in 30 years' time per local customs related to ownership transfers to secure earnings for the next generation. If the appropriate discount rate is 6 percent, what is the present value of this future payment?
5-38. Royal Leeds Bank gives 5 percent interest on a fixed deposit compounded annually. The Citizen York Bank offers 4.75 percent on its fixed deposit compounded monthly. Where would you prefer to deposit your money?
5-39.6 If you borrow 100 from a payday lender in the United Kingdom, you are expected to pay back 120 in 15 days. What is the effective annual rate (or annual percentage rate) on this type of loan?
6-15. What should be the present value of an eight-year annuity payment that pays $1,700 annually given an applicable discount rate of 5 percent?
6-25. On December 31, Son-Nan Chen borrowed $100,000, agreeing to repay this sum in 20 equal annual installments that include both principal and 15 percent interest on the declining balance. How large will the annual payments be?
6-52. How much do you have to deposit in an account paying 8 percent per annum if you want to withdraw 15,000 at the end of year 5 and then 5,000 each year for next five years (from Year 6 to year 10)?
7-3. How do cash dividends affect the realized rate of return from investing in shares of common stock?
7-7. Describe the five-step process used to calculate the variance in the rate of return for an investment.
8-1. In Regardless of Your Major: Risk and Your Personal Investment Plan on page 256, what are the four guidelines suggested for analyzing your personal investment decisions?
8-2. What did Depression-era humorist Will Rogers mean when he said, "People tell me about the great return I'm going to get on my investment, but I'm more concerned about the return of my investment"?
Step by Step Solution
There are 3 Steps involved in it
Step: 1
511 Jake Mai deposited 300000 in a bank account earning 9 per annum In the fourth year the interest earned will be 300000 009 27000 The simple interest earned in the fourth year will be 300000 009 270...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