We use cookies to personalise content and advertisements and to analyse access to our website. Furthermore, our partners for online advertising receive pseudonymised information about your use of our website.
Please click on "Accept cookies" if you agree to the setting of cookies. Cookies that do not require consent remain unaffected by this, see
cookie policy and privacy policy.
DECLINE COOKIES

1. A bank account has an interest rate of 1.8%. What is the equivalent interest rate used whenâ€¦

a) compounding monthly? b) compounding quarterly?

c) compounding weekly? d) compounding daily?

2. Mike invests $10 000 at 6% per year compounded weekly. Determine the total interest Mike earned after 3 years.

3. Jeremy plans to go on a cruise 4 years from now. He will need $7500 at that time. What principal should Jeremy invest now at 8.4% per year compounded monthly to obtain the required amount?

4. Adrian wants to have $15000 in 3 years to start a mechanic shop. He plans to save the money by making regular deposits into an annuity that earns 4.8% compounded monthly. What monthly deposits does Adrian have to make?

Guest Nov 1, 2017

#1**0 **

1) :

a - [1 + 0.018/12]^12=1.018149 - 1 x 100 =**1.815%** compounded monthly.

b - [1 + 0.018/4]^4 =1.018122 -1 x 100 =**1.8122%** componded quarterly.

c - [1 + 0.018/52]^52=1.018160 - 1 x 100=**1.816% **compounded weekly.

d -[1 + 0.018/365]^365=1.0181625 - 1 x 100=**1.81625% **componded daily.

2):

FV = PV[1 + R]^N

FV =10,000 [1 + 0.06/52]^(3*52)

FV =10,000 x 1.19709313870..........

**FV =$11,970.93 - The amount in Mike's account after 3 years.**

**$11,970.93 - $10,000 =$1,970.93 Total interest earned.**

3):

PV = 7,500 / [1 + 0.084/12]^(4*12)

PV = 7,500/ [1.007]^48

PV = 7,500/ 1.39770199988.......

**PV =$5,365.95 - This is what Jeremy must invest today.**

4):

This is the formula you would use to calculate this one:

FV = PMT{[1 + 0.048/12]^(3*12) - 1 / (0.048/12)}

15,000 =PMT {[1.004]^36 -1 / (0.004)}

15,000 =PMT x 38.638108459.........

PMT = $15,000 / 38.638108459...........

**PMT=$388.22 Monthly payment that Adrian must make every month for 3 years.**

Guest Nov 1, 2017