Independent parts
a- Calculate the present value (P0 =?) of $6,500 to be received in two yearsâ time when the discount rate is 8% per annum, compounded annually.
b- $700 is invested at nominal interest rate of 6% per annum. Calculate the amount due (Pt =?) at the end of 7 years if interest is compounded semiannually. c- Calculate the annual rate of interest (i =?) required for $10,000 to become $80,000 in 15 years. Assume quarterly compounding.
d- A bank pays 8% interest compounded annually. Calculate the number of years (t =?) it will take for $100,000 to grow to its doubled value? e- A family wants to start a child education plan to pay for their daughterâs university tuition in 18 years.
The total 4-year tuition will cost $100,000. They have $10,000 to invest now at a continuously compounded interest rate,
i. Find i. If a bank is willing to give them a rate of 10% compounded continuously, will it suffice?
Independent parts
a- Calculate the present value (P0 =?) of $6,500 to be received in two yearsâ time when the discount rate is 8% per annum, compounded annually.
b- $700 is invested at nominal interest rate of 6% per annum. Calculate the amount due (Pt =?) at the end of 7 years if interest is compounded semiannually. c- Calculate the annual rate of interest (i =?) required for $10,000 to become $80,000 in 15 years. Assume quarterly compounding.
d- A bank pays 8% interest compounded annually. Calculate the number of years (t =?) it will take for $100,000 to grow to its doubled value? e- A family wants to start a child education plan to pay for their daughterâs university tuition in 18 years.
The total 4-year tuition will cost $100,000. They have $10,000 to invest now at a continuously compounded interest rate,
i. Find i. If a bank is willing to give them a rate of 10% compounded continuously, will it suffice?
