FI 311 Connect homework #4

FI 311 Connect homework #4 - CONNECT 4 ANSWERS 1) Gerold...

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1) Gerold invested $110 in an account that pays 5 percent simple interest. How much money will he have at the end of 6 years? $137.50 $143.00 $148.72 $135.85 $132.00 Ending value = $110 + ($110 x .05 x 6) = $143.00 2) You have just made your first $4,000 contribution to your retirement account. Assuming you earn an 8 percent rate of return and make no additional contributions. Required: (a ) What will your account be worth when you retire in 40 years? 86,898.09 (b ) What will your account be worth if you wait 5 years before contributing? 59,141.38 3) You are scheduled to receive $44,000 in two years. When you receive it, you will invest it for 8 more years at 8.0 percent per year. How much will you have in 10 years? $52,455.63 $94,992.70 $81,440.93 $77,368.88 $85,512.98 We need to find the FV of a lump sum. However, the money will only be invested for 8 years, so the number of periods is 8. FV = PV(1 + r ) t FV = $44,000(1.080) 8 = $81,440.93 4) You're trying to save to buy a new $170,000 Ferrari. You have $40,000 today that can be invested at your bank. The bank pays 5.3 percent annual interest on its accounts. How long will it be before you have enough to buy the car? 26.02 years
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This note was uploaded on 11/16/2011 for the course FI 311 taught by Professor Booth during the Fall '06 term at Michigan State University.

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FI 311 Connect homework #4 - CONNECT 4 ANSWERS 1) Gerold...

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