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1 Aug 2018

Assume you make monthly deposits of $200 starting one month from now into an account that pays 6% per year, compounded semiannually. If you want to know how much you will have after four years, the value of i you should use in the F/A factor, assuming no interperiod interest, is

A) 6%

B) 12%

C) .5%

D) 3%

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mdasfaaruddinshareefLv10

20 May 2023

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Related questions

Calculate the amount of money that you would hve in your saving account at the end of 12 months if you made the following deposits:

(Month Number, Deposit $): (1, $200), (3, $90), (6, $70), (7, $75), (8, $85), (11, $70).

Assume that the bank pays 6% interest per year, compounded semiannually, and that it pays simple interest on any interperiod deposits.

jadeleopard134

17) A $50,000 municipal bond has an interest rate of 6% per year, compounded semiannually. The bond will mature in 10 years. If the market interest rate is 8% per year compounded semiannually, a person purchasing the bond should be willing to pay:

a. An amount less than $50,000

b. $50,000

c. An amount greater than $50,000

d. The amount cannot be determined from the information provided

18) Two mutually exclusive alternatives, A and B, are to be evaluated by the ROR method. The initial investment for alternative B is greater than that of alternative A. If the overall ROR of both alternatives A, and B, is greater than the MARR, then:

a. Select alternative A because it has a lower initial investment cost.

b. Select alternative B because it has a higher initial investment cost.

c. Conduct an incremental analysis and select A if the ROR of the increment exceeds the MARR

d. Conduct an incremental analysis and select B if the ROR on the increment exceeds the MARR.

19) A person purchases a $5,000, 5% per year bond, with interest payable semiannually, for the amount of $4,000. The bond has a maturity date of 14 years from now. The equation for calculating how much the person must sell the bond for 6 years from now in order to make a rate of return of 12% per year, compounded semiannually, is:

a. 0 = 4,000 + 125(P/A,6%,12) + x(P/F,6%,12)

b. 0 = 4,000 + 100(P/A,6%,12) + x(P/F,6%,12)

c. 0 = 5,000 + 125(P/A,6%,12) + x(P/F,6%,12)

d. 0 = 4,000 + 125(P/A,12%,6) + x(P/F,12%,6)

20) How much must you deposit in your retirement account each year for 10 years starting now (i.e., years 0 through 9) if you want to be able to withdraw $50,000 per year forever beginning 30 years from now? Assume the account earns interest at 10% per year.

a. $4,239

b. $4,662

c. $4,974

d. $5,471

ceruleanrat918

1. Cash Flow Diagrams and Compounded Interest: John decides to take out a loan for $10,000 for school at an annual interest rate of 10%. He agrees to make four equal payments, but will defer these payments for four years while in school. Starting at the end of the 5^th year, he makes four equal annual payments (years 5, 6, 7 and 8). At the end of the 8^th year, the loan is paid off.

(a) Create a table that depicts the cash flow diagram for this problem. It should cover years 0 to 8, and should show the balance, interest charges, each payment, how much of that payment went towards interest and how much towards the principal. The balance should be zero at the end of the 8^th year. Use trial and error to find the required payment.

(b) Compute the annual payment using one of the built-in Excel functions discussed in class. Show that this gives the same answer as (a).

(d) Suppose interest is compounded twice per year instead of annually, but he still makes four annual payments starting at the end of the 5^th year. What is the new annual payment?

2. Kate will purchase a house for $500,000 with a 10% down payment and $10,000 in closing costs. The closing costs are included in the loan. A 10-year loan is arranged at 5% interest compounded monthly.

(a) What is the monthly payment?

(b) By choosing to include the closing costs in the loan, how much money was paid in interest on the closing costs over the life of the loan.

(c) What is the effective interest rate for this loan? (Hint: you must take into account the monthly compounding AND the closing costs.)

(d) Suppose closing costs were paid at closing. How does this change the overall cost of the loan? How does this change the effective interest rate?

(NOTE: EVERYTHING SHOULD BE DONE IN EXCEL. OTHERWISE NO POINTS. INCLUDE THE FUNCTION USED AS WELL)