This preview shows pages 1–2. Sign up to view the full content.
This preview has intentionally blurred sections. Sign up to view the full version.
View Full Document
Unformatted text preview: O O O O (5) (5) O O O O (9) (9) (3) (3) (1) (1) O O (6) (6) (8) (8) O O (7) (7) O O O O O O (2) (2) (4) (4) 1) Huntington Bank offers an account that pays 4%, compounded daily. They decide to change to compounding four times a year. What interest rate should they offer to obtain the same annual effective rate as the original account? 1 C i 4 4 = 1 C .04 365 365 1 C 1 4 i 4 = 1.040808478 i d 4 $ 1 C .04 365 365 4 K 1 i := 0.040198440 2) On January 1, I win a prize the pays $P at the beginning of each month for 10 years with the first payment starting immediately. Find $P given that the present value of my prize at 3% interest compounded monthly is $1,000,000. i d .03 12 ; j d 1 C i ; n d 12 $ 10 i := 0.002500000000 j := 1.002500000 n := 120 solve j n K 1 i $ j $ j K n $ x = 1000000, x 9631.994490 3)You borrow $5,000 at the beginning of year 1 at 3% annual effective interest. You pay $1000 at the end of year 1, and $2,000 at the end of year 2, $P at the end of year 3, $400 at the end of year 4, and $400 at the end of year 5, after which you owe nothing. Find P. i d .03; i := 0.03 solve 5000 $ 1 C i 5 = 1000 1 C i 4 C 2000 $ 1 C i 3 C P $ 1 C i 2 C 400 $ 1 C i C 400, P 1577.347120 4) First Bank pays 4% interest, compounded daily. I open an account on January 1 by depositing 10,...
View
Full
Document
 Spring '08
 Staff

Click to edit the document details