Fall2009 Exam 1 solution

Fall2009 Exam 1 solution - 1. You invest $20, 000 now in a....

Info iconThis preview shows pages 1–6. Sign up to view the full content.

View Full Document Right Arrow Icon
Background image of page 1

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

View Full DocumentRight Arrow Icon
Background image of page 2
Background image of page 3

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

View Full DocumentRight Arrow Icon
Background image of page 4
Background image of page 5

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

View Full DocumentRight Arrow Icon
Background image of page 6
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: 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? ’ i 12.1" 21 LA) 2 z - )1, I / 3) f y//,// Q14 JV! /1 \ ,«vrue/ /1,“J' 2 l 227/ I; \ / / 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? 3. Let a = 1+z't2 where z' is considered a fixed interest rate. Find 6 For extra credit, make an observation about the limiting behavior of 6 (t) and What it means to an investor. s / J / ‘ W i '“ 9,1 /.= - A v a) 4 i ' / 4. Put 1(3) in terms of d“), 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. For bonus points, approximate the yield rate using the guess and check method assuming compound interest. fl I “. IL) l L l g; 15:79:) _ Vi “ TC/v’ I. .7; “ 7 r ‘ l as / a U as J. 2 ‘21,)L) 7 7 ' ‘ 4 l J _- n C r 7:) U x‘.‘ Cl/Ji I I 35;; r ‘ CJl/l’l A \ '/’/" # ; ‘f— — 1 . :L C V (‘y,.{ / 1 My.) [/ Z: / \ v11, , _ I // 7. Graduate Find the level effective rate of interest over a three- yoar period which is equivalent to an effective rate of discount of 8 percent the first year7 5 percent continuous interest the second year, and 9 percent interest convertible monthly the third year. 2/ g V) ’7 ...
View Full Document

Page1 / 6

Fall2009 Exam 1 solution - 1. You invest $20, 000 now in a....

This preview shows document pages 1 - 6. Sign up to view the full document.

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