Question
Suppose you are to receive the following cashflows in the future, at the times indicated below. (a) Assuming that you deposit all cashflows into a
Suppose you are to receive the following cashflows in the future, at the times indicated below. (a) Assuming that you deposit all cashflows into a savings account that earns interest at a rate of 3.6% nominal, convertible 12 times per annum, what is the accumulated value of your savings in exactly 21 years time?
Hint: Use Excel! ______________________________
(b) Repeat part (a), but with the following interest / earning rates applying:
[i] (1) i = 7.3% ____________________________________
[ii] (0.5) i =7.3% ____________________________________
[iii] (2) i = 7.3% ____________________________________
[iv] (4) d = 7.6% ____________________________________
(c) What does the interest / earning rate have to be, in order for the accumulated value in 21 years time to be equal to $1 million? Give your answer in terms of i, the annual effective rate of interest, to 3 significant figures. _________________________________
(d) What does the interest / earning rate have to be, in order for the accumulated value in 21 years time to be equal to $350,000? Give your answer in terms of i, the annual effective rate of interest, to 3 significant figures. _________________________________
Question 3 (10 marks) Suppose you are to receive the following cashflows in the future, at the times indicated below (a) Assuming that you deposit all cash flows into a savings account that earns interest at a rate of 3.6% nominal, convertible 12 times per annum, what is the accumulated value of your savings in exactly 21 years time? Hint: Use Excel Cashflovw 9,506 2,443 41,377 5,169 74,865 4,253 2,400 21,767 6,715 Time from now (vears 0.25 0.5 2.5 CashflowTime from now (vears 8,154 10,450 7,432 49,534 4,282 2,416 55,921 5,665 59,203 13.25 14 14.5 15 15.5 18 19.5 19.75 3.75 4 4.25 12.75 (b) Repeat part (a), but with the following interest/earning rates applying [ii] 0.5)-7.3% [iii] 2)-7.3% [iv] d(4)-7.6% (c) What does the interest/earning rate have to be, in order for the accumulated value in 21 years' time to be equal to $1 million? Give your answer in terms of i, the annual effective rate of interest, to 3 significant figures (d) What does the interest /earning rate have to be, in order for the accumulated value in 21 years' time to be equal to $350,000? Give your answer in terms of i, the annual effective rate of interest, to 3 significant figures Question 3 (10 marks) Suppose you are to receive the following cashflows in the future, at the times indicated below (a) Assuming that you deposit all cash flows into a savings account that earns interest at a rate of 3.6% nominal, convertible 12 times per annum, what is the accumulated value of your savings in exactly 21 years time? Hint: Use Excel Cashflovw 9,506 2,443 41,377 5,169 74,865 4,253 2,400 21,767 6,715 Time from now (vears 0.25 0.5 2.5 CashflowTime from now (vears 8,154 10,450 7,432 49,534 4,282 2,416 55,921 5,665 59,203 13.25 14 14.5 15 15.5 18 19.5 19.75 3.75 4 4.25 12.75 (b) Repeat part (a), but with the following interest/earning rates applying [ii] 0.5)-7.3% [iii] 2)-7.3% [iv] d(4)-7.6% (c) What does the interest/earning rate have to be, in order for the accumulated value in 21 years' time to be equal to $1 million? Give your answer in terms of i, the annual effective rate of interest, to 3 significant figures (d) What does the interest /earning rate have to be, in order for the accumulated value in 21 years' time to be equal to $350,000? Give your answer in terms of i, the annual effective rate of interest, to 3 significant figuresStep by Step Solution
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