Unformatted text preview: $500,000 or receiving $100,000 now and $90,000 per year for 5 years. The interest rate that your bank pays on savings deposits is 5%. Which method of payment will you accept and why? PV = $500,000 PV = $100000+ (90000/0.05)*(1-1.05^(-5)) = $489,652 4. You have graduated from college and you want to save up money to make a down payment of $40,000 at the end of 3 years to buy a new house. If the annual interest rate is 5%, what should your annual saving be? 40000 = (C/0.05)*(1.05^3)-1) C= $12688.34...
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This note was uploaded on 02/13/2012 for the course ECON 423 taught by Professor Vd during the Spring '08 term at UNC.
- Spring '08