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Exam1_Fall2009

# Exam1_Fall2009 - Name ID 1 You invest \$20 000 now in a bank...

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Name: ID

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1. You invest \$20 , 000 now in a bank that offers a nominal rate of 5% convertible monthly. How long will it take for you to earn \$100 , 000?
2. You loan a friend \$800 in return for \$1 , 400 to be given back in 6 years. At what rate of simple interest does this imply?

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3. Let a ( t ) = 1+ it 2 where i is considered a fixed interest rate. Find δ ( t ). For extra credit, make an observation about the limiting behavior of δ ( t ) and what it means to an investor.
4. Put i (3) in terms of d (5) .

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5. On January 1, 2009 you have \$1 , 000 in a bank account. You invest an additional \$700 on June 1, 2009, and \$900 on June 1, 2010. You withdraw \$350 on January 1, 2010. Finally, on January 1, 2011 you have \$3 , 500 in the account. Approximate the annual yield rate using the method we developing by assuming simple interest.

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