Please answer these fully and show your work!! Step by step if you can. Trying t
ID: 2738453 • Letter: P
Question
Please answer these fully and show your work!! Step by step if you can. Trying to study hard!!
Amanda only has 600 today but needs 1300 to buy a new laptop. How long will Amanda have to wait to buy the laptop if she earns 8 percent compounded annually on her money?
Kate wants to invest 1000 for five years. Which one of the following will provide her with the largest future value? 6 percent int compounded monthly, 7 percent int compound monthly, 7 percent simple, 6 percent simple comp annually, or 6 percent simple?
You want to have 15,000 for a down payment on a house 5 years from now. If you can earn 13 percent, compounded annually on your savings, how much do you need to deposit today to reach your goal?
Your firm has been told that it needs $100,000 today to fund a $150,000 expansion projecct 8 years from now. What rate of interest was used in the present value computation?
Explanation / Answer
Amanda only has 600 today but needs 1300 to buy a new laptop. How long will Amanda have to wait to buy the laptop if she earns 8 percent compounded annually on her money?
Here, Principle = 600, Interest rate(i) = 8%, Future Value = 1300, Time(n)= ?
As per future value formula FV = P(1+i)^n
1300 = 600(1+0.08)^n
1.08^n = 2.167
Taking log of both sides,
N Log(1.08) = Log(2.167)
N = 0.3358/0.03342 = 10.05 years
Kate wants to invest 1000 for five years. Which one of the following will provide her with the largest future value? 6 percent int compounded monthly, 7 percent int compound monthly, 7 percent simple, 6 percent simple comp annually, or 6 percent simple?
Value of 1000 for different interest rates for 5 years,
6%(Monthly Compounding) = 1000((1+6%/12)^5*12) = 1348.85
7%(Monthly Compounding) = 1000((1+7%/12)^5*12) = 1417.63
7% simple = 1000*5*7/100 + 1000 = 1350
6% simple compounded annually = 1000(1+6%)^5 = 1338.23
6% simple = 1000*5*6/100 +1000 = 1300
You want to have 15,000 for a down payment on a house 5 years from now. If you can earn 13 percent, compounded annually on your savings, how much do you need to deposit today to reach your goal?
As per present value formula PV = FV*(1+i)^-n
PV = 15000*(1+13%)^-5
PV = 15000*0.5428 = 8141.40
Your firm has been told that it needs $100,000 today to fund a $150,000 expansion projecct 8 years from now. What rate of interest was used in the present value computation?
PV = 100000, FV = 150000, Time = 8, R = ?
100000 = 150000(1+R)^-8
(1+R)^-8 = 0.67
1.5 = (1+R)^8
1+R = 1.5^(1/8)
1+R = 1.05198
R = 5.2%