ORIE 350
Homework #6
Due October 12, 2006
Time Value of Money
1.
Alex Trabeck opens a savings account at CFCU.
The advertised APR is 3.45%,
compounded monthly.
If he deposits $20,000 today, what will the balance be in the
account 30 months from now, assuming no other deposits or withdrawals?
(
29
(
29
002831
.
0
1
0345
.
1
1
1
12
1
1
=

=

+
=
c
APR
i
(
29
(
29
89
.
769
,
21
$
002831
.
1
000
,
20
1
30
=
=
+
=
n
i
PV
FV
2.
You have just made a $10,000 deposit to your savings account.
Your rich aunt will
make an additional deposit of $5,000 to your account one year from now.
Assuming you
earn an annual nominal interest rate of 4%, compounded monthly, and make no
additional contributions, what will your account be worth 4 years from today?
The $10,000 deposit earns interest for 48 months; the $5,000 deposit earns interest for
36 months.
The interest rate per month is 0.04/12 = 0.003333.
(
29
(
29
(
29
35
.
368
,
17
$
003333
.
1
000
,
5
003333
.
1
000
,
10
1
36
48
=
+
=
+
=
n
i
PV
FV
3.
An investment pays you 15 annual payments of $20,000, with the first payment
occurring 11 years from now.
Recall that the compounding frequency equals the
This preview has intentionally blurred sections. Sign up to view the full version.
View Full Document
This is the end of the preview.
Sign up
to
access the rest of the document.
 Fall '08
 CALLISTER
 Time Value Of Money, Interest, Jessica Simpson, FV ln PV

Click to edit the document details