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PROBLEMS: (show all work!) 1 What is the EAR if the APR is 8.0% and the compounding period is monthly? Please round to 2 decimal
PROBLEMS: (show all work!) 1 What is the EAR if the APR is 8.0% and the compounding period is monthly? Please round to 2 decimal places and use % symbol. (6 points) 2. Warren Buffett decides to endow an annual investment symposium at DePaul, starting next year and continuing forever. The symposium is expected to cost $4,000 at that time. Interest rates are 7%. How much must he contribute today to fund this symposium? (6 points) 3. John is saving for retirement at age 65. He doesn't know if he should save in three large lumps (inheritance from his three uncles), or in equal annual amounts from his paychecks. Consider the two options below (a & b) and calculate which one will generate more savings at John's 65th year. Interest rates are 6% a. He will make deposits of $20,000 at ages 45, 55 and 60 (see first timeline). b. He will make annual payments of $2,000 every year between now and his 65th year (see the second timeline). (10 pts) a. 35 45 55 60 65 ? 20,000 20,000 20,000 b. 35 45 55 65
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