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Unit 3: Homework Assignment
- If you deposit $2000 in a bank account today that pays 6% annually, how much will be in your account after 5 years?
- What is the present value of a security that will pay $29,000 in 20 years if the interest rate is 5% annually?
- Find the following values assuming that compounding/discounting occurs annually and then work them again assuming monthly compounding.
- $600 compounded for 1 year at 6%
- $600 compounded for 2 years at 6%
- The present value of $600 that has been invested for 1 year at 6%
- The present value of $600 invested for 2 years at a discount rate of 6%
- $200 compounded for 10 years at 4%
- $200 compounded for 10 years at 8%
- The present value of $200 that has been invested for 10 years at 4. 4. TB Bank pays 8 percent simple interest on its savings account balances, whereas FB Bank pays 8 percent interest compounded annually. If you made a deposit of $9,000 in each bank how much more money would you earn from FB Bank than TB Bank at the end of 8 years.
5. Suppose the total cost of a college education was $180,000 when your child enters as a freshman in 18 years. At present, you have $52,000 to invest. What annual rate of interest must you earn on your investment to cover the cost of your child’s college education?