ADM 2350 Lecture Notes - Lecture 1: Savings Account, Interest Rate, Blackboard

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roseskunk973

30 Jan 2017

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Today we started to talk about the time value of money. These notes will show what was discussed in class on this particular topic. While i am unable to reproduce examples that were put on the blackboard, to better teach the subject, i am trying to provide you with similar ones. We need to understand that if you have today this money can be invested at an applicable interest rate per period of investment r and in one period you will be able to grow your investment to (1+r) Interest is annual, period of investment is one year, so, you will get (1+0. 03)=. 5 in one year. Interest is annual, but period of investment is two years. Investing for two years can be seem as investing for one year at a time (see the picture above). Thus, in two years you will get (1+0. 03) (1+0. 03)= (1+0. 03)2= . 045.

Related Questions

You have just deposited X dollars in your bank account that pays interest of 25 percent p.a. You discover that at the end of one year you have $ 14,559 in the account. What was X, that is, the amount of money that you deposited today? (Record your answer without a dollar sign, without commas and round your answer to 2 decimal places; that is, record $3,245.847 as 3245.85).

6)Your neighbor is asking you to invest in a venture that will double your money in 3 year(s). Compute the annual rate of return that he is promising you? (Record your answer as a percent rounded to 1 decimal place; for example, record .186982 = 18.7% as 18.7).

Suppose you have decided to start saving money to take a long-awaited family vacation in Northern Brazil, which you want to take 5 years from today. You estimate the amount you will have to pay at that time will be $10,000. The savings account you established for your trip offers 5% per annum interest compounded quarterly.

How much will you have to deposit each year if your first deposit is made 1 year from today and the final deposit is made 1 year before you depart?

(Hint: Consider effective annual rate in your calculation)

greyswan843

Please answer the following! Thank you!

1.)Jennifer Davis wants to accumulate $16,000 by the end of 12years. If the annual interest rate is 6.40 percent and interestcompounds semiannually, how much will she have to invest today toachieve her goal? (If you solve this problem withalgebra round intermediate calculations to 6 decimal places, in allcases round your final answer to the nearestpenny.)

Present value of investment= ?

2)Your brother has asked you for a loan and has promised to payyou $9,100 at the end of three years. If you normally invest toearn 6.90 percent per year, how much will you be willing to lend toyour brother if you view this purely as a financial transaction(i.e., you donât give your brother a special deal)? (Ifyou solve this problem with algebra round intermediate calculationsto 6 decimal places, in all cases round your final answer to thenearest penny.)

Amount To be invested today?

3)Matthew Young is considering aninvestment that pays 5.40 percent, compounded annually. How muchwill he have to invest today so that the investment will be worth$27,000 in six years? (Do not round intermediatecalculations and round your final answer to the nearestpenny.)

Amount to be invested today?

chocolaterat647

ADM 2350 Lecture Notes - Lecture 1: Savings Account, Interest Rate, Blackboard

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