a) How much will be in your bank account at the end of five years if you invest $10,000 now at 12% per annum, compounded annually? And what if the interest rate is 12% per annum, but compounded monthly?
b) In the poor areas of many cities around the world, we find people offering pay-day loans. One loan agency in Dacca offers to loan Gita $20 till her pay cheque arrives in two weeks time. When it arrives, she must pay back the $20 plus a $2 service charge. What is the effective annual interest rate she is paying on the loan?
c) An oil pipeline is about to be constructed across BC. Some environmentalists are concerned that with the present design, there is a high probability that oil will leak in about 100 years time. If that happens, about 10 billion dollars worth of arable land will be rendered unusable. What is the most it is worth spending now in order to prevent this loss in the future? (Assume that if the money is not spent now, it can be invested at 5% interest.)
a) How much will be in your bank account at the end of five years if you invest $10,000 now at 12% per annum, compounded annually? And what if the interest rate is 12% per annum, but compounded monthly?
b) In the poor areas of many cities around the world, we find people offering pay-day loans. One loan agency in Dacca offers to loan Gita $20 till her pay cheque arrives in two weeks time. When it arrives, she must pay back the $20 plus a $2 service charge. What is the effective annual interest rate she is paying on the loan?
c) An oil pipeline is about to be constructed across BC. Some environmentalists are concerned that with the present design, there is a high probability that oil will leak in about 100 years time. If that happens, about 10 billion dollars worth of arable land will be rendered unusable. What is the most it is worth spending now in order to prevent this loss in the future? (Assume that if the money is not spent now, it can be invested at 5% interest.)
