FV in 10 years = $4,500[1 + (.093/365)]
10(365)
= $11,403.94
FV in 20 years = $4,500[1 + (.093/365)]
20(365)
= $28,899.97
18.
For this problem, we simply need to find the PV of a lump sum using the equation:
PV = FV / (1 +
r)
t
It is important to note that compounding occurs daily. To account for this, we will divide the
interest rate by 365 (the
number of days in a year, ignoring leap year), and multiply the number of periods by 365. Doing
so, we get:
PV = $58,000 / [(1 + .10/365)
7(365)
] = $28,804.71
19.
The APR is simply the interest rate per period times the number of periods in a year. In this
case, the interest rate is
30 percent per month, and there are 12 months in a year, so we get:
APR = 12(30%) = 360%
To find the EAR, we use the EAR formula:
EAR = [1 + (APR /
m
)]
m
– 1
EAR = (1 + .30)
12
– 1 = 2,229.81%
Notice that we didn’t need to divide the APR by the number of compounding periods per year.
We do this division to
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 Spring '08
 spurlin
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