Jan 27 - FIN3403 Conceptual Notes Thursday, January 27,...

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FIN3403 Conceptual Notes Thursday, January 27, 2011 New York Times article states that students are feeling much more stressed than ever before. Dr. Banko feels it is important to come up with new products and services that can be profitable off a generation who is stressed, concerned about their future, and feels a sense of inadequacy. In-Class Problems 1) If you deposit $100 in an account earning 6% with monthly compounding , how much would you have in the account in 5 years? Calculator Solution 1: P/Y = 12 I = 6 N = 60 PV = -100 FV = $134.89 Calculator Solution 2: P/Y = 1 I = 6/12 = 0.5 N = 60 PV = -100 FV = $134.89 With single payments, either technique works. One option is to and adjust P/Y and N; another is to adjust I/Y and N. This is NOT true with annuities, because it assumes that your PMT is assumed to be monthly if your N is monthly, even if it is an annuity and actually is every year. 2) If you invest $1,000 each year at 8% with monthly compounding , how much would you have after 3 years? The number if periods (N) and Interest rate (I/Y) must be consistent with each other i.e. both monthly, both annual, etc.
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Jan 27 - FIN3403 Conceptual Notes Thursday, January 27,...

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