FM (1).docx - 1.If you deposit $17,000 today in an account...

This preview shows page 1 - 3 out of 3 pages.

1.If you deposit $17,000 today in an account earning an annual rate of return of 10%, how much interest would be earned in the third year? How much would this amount differ from simple interest? 2.What is the future value of $500 a year for 9 years compounded annually at 10%? What is the future value of $900 for nine years compounded annually at 10%? b)900{(1+0.1) 9 =2122.15 a) Periodic payment-500 Time-9yrs Rate-10% Future value =500(1.1 9 -1)/0.1 Deposit $17,000 Rate 10% 1st Year interest 10% * $17000=$1700 2nd Year 10%*(1700+17000)=$1870 3rd Year 10%*(1700+1870+1700)=$2057 Interest on the basis of simple interest 10*1700=$1700 Difference in the third year 2057-1700=$357
Image of page 1

Subscribe to view the full document.

6789.738 3. To buy a new house, you must borrow $150,000. To do this, you take out a $150,000, 20-year, 10% mortgage. Your mortgage payments, which are made at the end of each year (one payment each year), include both principle and 10% interest on the declining balance. What amount will your annual payment be? 4. Pay for your education, you have taken out $28,000 in student loans. If you make monthly payments over 13
Image of page 2
Image of page 3

{[ 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