Subject: Math of Finance

You decided to quit smoking today. Now that you are going to save 400 /month, you decided to save those 400 per month in a bank account that offers a 5% interest rate compounded yearly, till the day you retire (that is to say, in 25 years). Please answer the following questions: 3. If you decide to do your deposits at the end of every month (similarly to ex.1, so your first deposit will be in one month from today) in a bank account that offers a 6% interest rate compounded yearly, and the deposits will increase in a 0.1% month after month, and you keep on doing so for the next 30 years: a) Draw the timeline (at least the first five periods) with its corresponding numeration of periods and cashflows in their corresponding points b) how much money will you have at the end? Show the workout c) What would it happen if the growth rate and the interest rate is the same? You decided to quit smoking today. Now that you are going to save 400 /month, you decided to save those 400 per month in a bank account that offers a 5% interest rate compounded yearly, till the day you retire (that is to say, in 25 years). Please answer the following questions: 3. If you decide to do your deposits at the end of every month (similarly to ex.1, so your first deposit will be in one month from today) in a bank account that offers a 6% interest rate compounded yearly, and the deposits will increase in a 0.1% month after month, and you keep on doing so for the next 30 years: a) Draw the timeline (at least the first five periods) with its corresponding numeration of periods and cashflows in their corresponding points b) how much money will you have at the end? Show the workout c) What would it happen if the growth rate and the interest rate is the same