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Erin has made several investments. He bought a bond with a face value of $2,500 and a coupon rate of 7%, 1000 shares of a company's stock for $8.60 / share, and he invested $5000 into a fund that's expected to grow by 3.5% per year.

 

1. Erin pays a broker a commission of $14 to buy and sell stock. After one year Erin sold all his shares when they were worth $9.15 per share. What is his net gain or loss? Show your calculations.

 

2. Erin's bond he purchased will mature in ten years. How much interest will he receive semiannually?

 

3. How long will it take the fund Erin invested in to be worth $10,000?

 

4. Erin's gross annual income is $51,350. He's paid biweekly and has 5% deducted from his paycheck for his 403(b) plan. Erin's employer matches his deduction up to 4%. How much is deposited into Erin's 403(b) plan each pay day?

Guest May 21, 2018
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1.

$9.15 - $8.60 =$0.55 inrease per share price in 1 year.

1,000 shares x $0.55 = $550 gross profit on 1,000 shares in 1 year.

$550 - $28.00(broker's fees) = $522.00 net profit on 1,000 shares after 1 year.

 

2.

$2,500 x [7% / 2] = $87.50 interest on the bond every 6 months.

$87.50 x [10 years x 2] =$1,750 total interest on the bond for 10 years.

 

3.

FV = PV x [1 + R]^N

10,000 =5,000 x [1 + 0.035]^N         divide both sides by 5,000

2 = 1.035^N                                      take the log of both sides

N =Log(2) / Log(1.035)

N = 20.15 years when $5,000 investment will become $10,000

 

4.

$51,350 / 26(bi-weekly payments) = $1,975.00 Erin's bi-weekly pay.

$1,975.00 x 5% =$98.75 deducted from his paycheck for 403(b) plan.

$1,975.00 x 4% =$79.00 His employer's contribution to 403(b) plan[If I understand your question]

$98.75 + $79.00 = $177.75 total contribution to 403(b) plan.

Guest May 21, 2018

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