Chapter 4 1. If you invest $1000 today at an interest rate of 10% per year‚ how much will you have 20 years from now‚ assuming no withdrawals in the interim? SOLUTION: n PV FV PMT Result 20 2. i 10 1000 ? 0 FV =6‚727.50 a. If you invest $100 every year for the next 20 years‚ starting one year from today and you earn interest of 10% per year‚ how much will you have at the end of the 20 years? b. How much must you invest each year if you want to have
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The Strong-Campbell Interest Inventory uses a five-point scale ranging from strongly like to strongly dislike. Individuals are asked to rate them self’s in six broad areas. The five area are occupation‚ subject areas‚ activities‚ leisure activities‚ people‚ and characteristics. The Strong-Campbell Interest Inventory has a reliability coefficient alphas of .95 and a test-retest reliability ranging from .88 - .95. Convergent validity was showed by comparing the current version to the previous version
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account earning 2.50% interest compounded annually. How much would you have at the end of four years? How much would you have if the interest is compounded semi-annually? Annually‚ in four years‚ I would have a final savings balance of $13‚078.86. If my interest was compounded semi-annually of $13‚084.52. That is a difference of $5.66. So‚ there is little difference in making payments annually or semi-annually. If I changed the interest rate‚ to a higher rate of 3% interest‚ I would have a final
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INDIVIDUAL ASSIGNMENT UDBS Consider a 10 year bond that has a face value shs 1000‚ a coupon rate of 6% and pays interest once a year. (a)Suppose person A bought this bond at par when it was initially issued and sold it 1 year later to person B for shs 1024.What is B’s total return? Soln Total return =[ Interest paid +(selling price – buying price)]/buying price Given; Annual interest paid = coupon rate x par value‚ coupon rate = 6%‚ par value =1000. = 6%
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nearly which of the following? (a) $167 (b) $172 (c) $188 (d) $200 (e) $218 2. A specialized automatic machine costs $300‚000 and is expected to save $111‚837.50 per year while in operation. Using a 12% interest rate‚ what is the discounted payback period? (a) 4 (b) 5 (c) 6 (d) 7 (e) 8 3. With interest at 8% compounded annually‚ how much money is required today to provide a perpetual income of $14‚316 per year? (a) $178‚950 (b) $96‚061 (c) $175‚134 (d) $171‚887 4. What is the internal rate
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borrower would pay on the loan. EAR determine actual loan as nominal values differs due to changing interest rates or compounding values. This rate is annual rate of interest which is equivalent to the nominal rate compounded frequently (Effective Annual rate‚ 2010). Effective annual rate (EAR) can be calculated by formula given below. Effective Annual Rate= (1+k/m)^m-1 Where K represents nominal interest rate M represents compounding frequency (15 years‚ 30 years) Table 1 Five Mortgage Lenders
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you sign the Honor Pledge: I have neither given nor received any aid on this examination.________________ HELPFUL FORMULAS ‚ ‚ ‚ ‚ 1 ‚ 1 ‚ ‚ 1 1 ‚ ‚ ‚ ‚ 1 1 ‚ 1 1 1 1 1 1 1 2 ‚ 1. Given an interest rate of 7.3 percent per year‚ what is the value at date t = 7 of a perpetual stream of $2‚100 annual payments that begins at date t = 15? 2100 0.073 1 1.073 17‚567.03 2. You’ve just joined the investment banking firm of Dewey‚ Cheatum
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account earning 2.50% interest compounded annually. How much will you have at the end of four years? How much would you have at the end of four years if interest is compounded semiannually? If interest compounded annually I would have saved $5‚519.06 at the end of four years. If interest compounded semiannually I would have saved $5‚522.43 at the end of four years. 2. Change the interest rate to a higher rate. How much will you have at the end of four years if interest is compounded annually
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Why is the time value of money concept important? In what quantitative decisions might the time value of money be used? How do you apply the time value of money concept to make decisions in your personal life? The idea of the time value of money is important because of the fundamental assertion that one would rather have X number of dollars now‚ than later. If the money is taken later a value of X+i is preferred. This concept is applied to all situations where someone uses the monies of another
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take a principal P to triple at a nominal rate of 4.5% compounded annually? What if interest is compounded continuously? 3. Suppose that after 4 years‚ an initial investment of $500 grew to $635.30 at a fixed interest rate. (a) Find the effective rate of interest earned. (b) Find the nominal rate if interest is compounded monthly. 4. Find the present value of the given future payment at the specified interest rate. (a) $1117.97 due in 10 years at an effective rate of 7%. (b) $1114.95 due in
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