Show all of your computations. Total 21 points Unsupported answers will not be a
ID: 1113819 • Letter: S
Question
Show all of your computations. Total 21 points Unsupported answers will not be accepted. Problem # 1 (3 points) Walker John deposited $6,000 with his local bank and plans to keep it on deposit for eight (8) years at an annual interest rate of 5.0% compounded quarterly. How much will Walker John have in the account at the end of year eight (8)? Problem #2 (2 points) What is the present worth of a future payment of $18,000, six (6) years from today at an interest rate of six percent (6%) compounded annually? Problem #3 (4 points) (a) What is the amount of interest earned on $63,500 left on deposit for nine (9) years at six percent (6%) simple interest per year? (b) If the nominal interest rate is seven percent (7%) compounded continuously what is the effective interest rate? Problem #4 (3 points) You deposit $1350 today, S1500 one (1) year from today, and $1900 six (6) years from today. How much money will you have at the end of eight (8) years given an interest rate of five percent (5%) compounded annually?Explanation / Answer
1. Here, we need to calculate the future value of $6,000 kept for 8 years at an annual interest rate of 5% compounded annually.
Future Value (FV) = Present Value (PV) (1+r)n
Where, r is the rate of interest (which is 5% = 0.05) and n is number of periods = 8. Here, PV =
So, FV = PV (1+0.05)8
= $6,000 (1 + 0.05)8
= $6,000 (1.05)8
= $6,000 * 1.4774 = $8864.73 approx.