BUSN 5200 week 7 homework
1. (Monthly compounding) If you bought a $1,000 face value CD that matured in nine months, and which was advertised as paying 9% annual interest, compounded monthly, how much would you receive when you cashed in your CD at maturity?
PV 1000 Annual interest Rate 0.09 r 0.0075 n 9 1069.560839
Amount at Maturity: $1,069.56 2. (Annualizing a monthly rate) You credit card statement says that you will be charged 1.05% interest a month on unpaid balances. What is the Effective Annual Rate (EAR) being charged?
r 0.0105 n 12 0.133537297
EAR: 13.35% 3. (FV of annuity due) To finance your newborn daughter’s education you deposit $1,200 a year at the beginning of each of the next 18 years in an account paying 8% annual interest. How much will be in the account at the end of the 18th year?
A 1200 r 0.08 n 18 48535.51589
FV: $48,535.52
4. (Rate of return of an annuity) Paul's Perfect Peugeot says they'll sell you a brand new Italian“Iron Man” motor scooter for $1,699. Financing is available, and the terms are 10% down and payments of $46.57 a month for 40 months. What annual interest rate is Paul charging you?
PV 1529.1 Scooter Cost 1699 n 40 Down Payment 169.9 pmnt 46.57
Rate 1.00% 0.120004684
Annual Interest Rate: 12% 5. (Rate of return of an annuity) You would like to have $1,000,000 40 years from now, but the most you can afford to invest each year is $1,200. What annual rate of return
PV 1000 Annual interest Rate 0.09 r 0.0075 n 9 1069.560839
Amount at Maturity: $1,069.56 2. (Annualizing a monthly rate) You credit card statement says that you will be charged 1.05% interest a month on unpaid balances. What is the Effective Annual Rate (EAR) being charged?
r 0.0105 n 12 0.133537297
EAR: 13.35% 3. (FV of annuity due) To finance your newborn daughter’s education you deposit $1,200 a year at the beginning of each of the next 18 years in an account paying 8% annual interest. How much will be in the account at the end of the 18th year?
A 1200 r 0.08 n 18 48535.51589
FV: $48,535.52
4. (Rate of return of an annuity) Paul's Perfect Peugeot says they'll sell you a brand new Italian“Iron Man” motor scooter for $1,699. Financing is available, and the terms are 10% down and payments of $46.57 a month for 40 months. What annual interest rate is Paul charging you?
PV 1529.1 Scooter Cost 1699 n 40 Down Payment 169.9 pmnt 46.57
Rate 1.00% 0.120004684
Annual Interest Rate: 12% 5. (Rate of return of an annuity) You would like to have $1,000,000 40 years from now, but the most you can afford to invest each year is $1,200. What annual rate of return