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# class+March29 - Math 103 Section 11 Tuesday Chapter 10 The...

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Math 103, Section 11, Tuesday, March 29, 2011 Chapter 10 The Mathematics of Money Assignment Chapter 10A Please do Exercises 18, 24, 30, and 36, pages 392-393 and upload to Sakai. Homework is due by Friday, April 1, 5 minutes before midnight Assignment Chapter 10B Please do exercises 38,60,66,and 68 and upload to Sakai. Homework is due by Tuesday, April 5, 5 minutes before midnight Homework to be discussed in class on Friday, April 1 Page 395, Exercise 63 and 65. Homework to be discussed in class on Tuesday, March 29 Exercises 23, 31, 35, 37. 1. Suppose that you deposit \$1237.50 in a savings account that pays 8.25% annual interest, with interest credited to the account at the end of each year. Assuming that no withdrawals are made, find the balance in the account after 4 ½ years. 2. 45 years ago Sally purchased a bond paying 4% annual compound interest. Today the investment has grown to a value of \$23,800. How much did Sally pay for the bond? Round your answer to the nearest dollar. If the Dow Jones Industrial Average (DJIA) starts the month at 11,000 and increases by 5% the first week, what would the percentage decrease have to be in the second week so that the DJIA is at 11,000, its starting value at the beginning of the month? Thank you Kristina for your solution! Kristina’s solution: 1 st week: Increasing by 5% means being multiplied by 1+5%=1+.05=1.05 1.05*11000=11550 2 nd week: Let X=value by which we need to multiply 11550 so that we end up with 11000 Then 11550 * X= 11000 X= .952381 What % decrease is this? 1-.952381=0.047619=4.76% decrease So a 4.76 % decrease will bring the DJIA back down to its starting value! Or, you can solve this problem in one step, as follows: Let X=value by which we need to multiply by so that we end up with 11000 Then 1.05*X*11000=11000 11550X=11000 X=11000/11550=.952381 which is a 4.76% decrease

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Homework solutions: Exercise 23. You buy a \$10,000 bond that pays 5% annual simple interest. When you cash in the bond, you have to pay 15% federal taxes on the interest you earned. How much money would you net if you cash in the bond after five years? Round your answer to the nearest penny. Since the interest is simple, the formula for simple interest (see p. 368 in the text) applies: F = P(1 + rt) There are two approaches to taking the tax into consideration. Method 1: P = \$10,000, the initial amount invested r = .05, i.e. the annual interest rate is 5% t = 5, the number of years over which interest is earned The future value before tax is \$10000( 1 + (.05)(5) ) = \$10000(1.25) = \$12500. This means that \$2500 is earned in interest, and 15% tax on that amount is \$375., so that after tax you are left with \$12500 - \$375. = \$12125 which is \$2125 more than you paid for the bond. You net \$2125.
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class+March29 - Math 103 Section 11 Tuesday Chapter 10 The...

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