Quiz 2 Spring 2008

# Quiz 2 Spring 2008 - money into an account earning 6 with...

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Quiz #2 Name:____________________________________ HADM225 Formulas: t= r) ln(1 PV) / ln(FV + FV = PV(1 + r) t r = (FV / PV) 1/t – 1 PV(Perpetuity)=C/r ( 29 ( 29 [ ] ( 29 [ ] ( 29 [ ] year. a in periods g compoundin of number the is n where ; 1 EAR 1 APR ; 1 APR/n 1 EAR 1 r 1 C Value Future Annuity ; r 1 1 - 1 C Value Present Annuity 1 - + × = - + = - + × = + × = n n t t n r r Round all answers to four decimal places. Show all work 1. You are planning to save for retirement over the next 30 years. To do this, you will invest \$400 a month in a stock account expected to earn 12% with monthly compounding and \$400 into a bond account expected to earn 6% with monthly compounding. When you retire, you will combine your
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Unformatted text preview: money into an account earning 6% with monthly compounding. How much can you withdraw each month from your account assuming a 25-year withdrawal period? 2. A bond has a face value of \$1000 and matures in 10 years. The bond makes no payments for the first 3 years, then pays \$50 semi-annually for the next 5 years, then pays \$60 semi-annually for the last two years. If the required return is 9% compounded semi-annually, what is the price of the bond?...
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