Class 9 9-19 - Class 9 Interest Rates ISE 2014 Click to...

Info iconThis preview shows pages 1–11. Sign up to view the full content.

View Full Document Right Arrow Icon
Click to edit Master subtitle style Class 9 – Interest Rates ISE 2014 Fall 2011
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Announcements This week is last chance to let me know if you have an official exam conflict For those taking normal exam time you’ll be in one of four classrooms based on your last name (the list is posted on Scholar) As soon as the ISE copier is fixed today I’ll post 4 practice exams with solutions on Scholar
Background image of page 2
Your Toolbox Cash Flow Diagrams P/G F/P A/G P/F Geometric Gradients P/A F/A A/P A/F
Background image of page 3

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
2 Topics for Today Multiple interest rates Nominal and Effective Interest Rates These topics cover the last problems on your homework
Background image of page 4
Multiple Interest Rates Multiple interest rates refers to rates that change over time We can already deal with these problems using our tools, we just need to apply them correctly
Background image of page 5

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Multiple Interest Rates So what do we mean by multiple interest rates? Consider the following problem… You invest $1,000 in a fund that will earn you 6% return Five years later you find a better investment opportunity and move all the money to a new fund that will earn 8% return. At the end of the 10th year you take your money out. How much money will you have?
Background image of page 6
Multiple Interest Rates As always we’ll start with a cash flow diagram Label the period over which each interest rate applies clearly Remember that our tic marks represent the end of the labeled year
Background image of page 7

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Strategy Our tools are designed for only one interest rate Therefore, we’ll need to use a new tool each time the interest rate changes
Background image of page 8
Solution X10 = $1,000(F/P,6%,5)(F/P,8%,5) X10 = $1,000(1.3382)(1.4693) X10 = $1,966.22
Background image of page 9

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Notes You won’t need to handle complex
Background image of page 10
Image of page 11
This is the end of the preview. Sign up to access the rest of the document.

This note was uploaded on 10/04/2011 for the course ISE 2014 at Virginia Tech.

Page1 / 29

Class 9 9-19 - Class 9 Interest Rates ISE 2014 Click to...

This preview shows document pages 1 - 11. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online