Management and Organizational Studies 2277A/B Lecture Notes - Lecture 3: Interest

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3 (cid:455)ears at (cid:862)si(cid:373)ple i(cid:374)terest(cid:863) (cid:449)ould (cid:271)e per year x 3 = . Ho(cid:449)e(cid:448)er, (cid:449)ith (cid:862)(cid:272)o(cid:373)pou(cid:374)d i(cid:374)terest(cid:863) (cid:455)ou ear(cid:374) i(cid:374)terest o(cid:374) the i(cid:374)terest alread(cid:455) paid so i(cid:374) this e(cid:454)a(cid:373)ple you have total interest of . 63. Fv of an annuity: you invest ,000 per year for 3 years and earn a 5% compounded annually. You make the investment at the end of each year. Figure out the payment/deposit - annuity: you expect to earn a compound rate of return of 5% annually. Fv of an annuity due: you invest ,000 per year for 3 years and earn a 5% compounded annually. You make the investment at the beginning of each year. Figure out the payment/deposit - annuity due: you expect to earn a compound rate of return of 5% annually. You want to save enough over four years so that you have ,155 that you estimate you will need to take a trip to hawaii.

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