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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"
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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 '“
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/.=  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.
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, _ 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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 Fall '10
 TimKnapik

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