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quiz%202%20solutions%202010%201%20spring

quiz%202%20solutions%202010%201%20spring - FNAN 301 Spring...

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FNAN 301, Spring 2010, quiz 2, solutions Find future value with simple interest and PMT for FV annuity 1. Four years ago from today, Lindsey invested \$6,500 in a security that has earned and is expected to continue to earn 10.0 percent per year in simple interest and that pays investors in 6 years from today. Julia wants to have as much money in 6 years from today as Lindsey expects to have in 6 years from today. How much would Julia need to contribute to her investment account each year for 6 years if she has nothing currently saved, makes equal annual contributions to her investment account, makes her first contribution in 1 year, and can earn 10.0 percent per year in compound interest? Recall that interest rates are assumed to be compound rates unless told otherwise (such as with Lindsey’s security), so the vast majority of the analysis of the time value of money in FNAN 301 involves compound rates. Therefore, the analysis of Julia’s account should be conducted in a way that is consistent with similar problems analyzed in the course. 1. Four years ago from today, Lindsey invested \$7,500 in a security that has earned and is expected to continue to earn 10.0 percent per year in simple interest and that pays investors in 6 years from today. Julia wants to have as much money in 6 years from today as Lindsey expects to have in 6 years from today. How much would Julia need to contribute to her investment account each year for 6 years if she has nothing currently saved, makes equal annual contributions to her investment account, makes her first contribution in 1 year, and can earn 10.0 percent per year in compound interest? Recall that interest rates are assumed to be compound rates unless told otherwise (such as with Lindsey’s security), so the vast majority of the analysis of the time value of money in FNAN 301 involves compound rates. Therefore, the analysis of Julia’s account should be conducted in a way that is consistent with similar problems analyzed in the course. 1. Four years ago from today, Lindsey invested \$8,500 in a security that has earned and is expected to continue to earn 10.0 percent per year in simple interest and that pays investors in 6 years from today. Julia wants to have as much money in 6 years from today as Lindsey expects to have in 6 years from today. How much would Julia need to contribute to her investment account each year for 6 years if she has nothing currently saved, makes equal annual contributions to her investment account, makes her first contribution in 1 year, and can earn 10.0 percent per year in compound interest? Recall that interest rates are assumed to be compound rates unless told otherwise (such as with Lindsey’s security), so the vast majority of the analysis of the time value of money in FNAN 301 involves compound rates. Therefore, the analysis of Julia’s account should be conducted in a way that is consistent with similar problems analyzed in the course.

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