Fall2009 Exam 1 solution

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

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

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