hw6 - ORIE 350 Homework#6 Due Time Value of Money 1 Alex...

Info icon This preview shows pages 1–2. Sign up to view the full content.

View Full Document Right Arrow Icon
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 payment frequency unless explicitly stated otherwise.
Image of page 1

Info icon This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
Image of page 2
This is the end of the preview. Sign up to access the rest of the document.

{[ snackBarMessage ]}

What students are saying

  • Left Quote Icon

    As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

    Student Picture

    Kiran Temple University Fox School of Business ‘17, Course Hero Intern

  • Left Quote Icon

    I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

    Student Picture

    Dana University of Pennsylvania ‘17, Course Hero Intern

  • Left Quote Icon

    The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

    Student Picture

    Jill Tulane University ‘16, Course Hero Intern