MA373 S13 Homework Chapter 2

Connor reinvests each payment at an interest rate of

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Unformatted text preview: interest rate of i . Taking into account reinvestment, Connor’s annual yield is 9%. Calculate i . 17. Derek lends 600 to a friend. The loan will be repaid with payments of P at the end of one year and 300 at the end of 3 years. Derek reinvests the payment of P at an annual effective interest rate of 8.25%. Taking into account reinvestment, Derek earns an annual yield of 10% on this loan. Determine P . Chapter 2, Section 6 Use the following information for questions 18 – 20. Time 0 ½ 1 1½ 2 Fund Value Before Contributions 20,000 21,000 24,000 30,000 29,000 Contributions 0 5000 4000 -3000 0 18. Calculate the exact annual dollar weighted return for the fund. 19. Estimate the annual dollar weighted return for this fund assuming simple interest. 20. Estimate the annual dollar weighted return for this fund assuming simple interest and that all cash flows occurred at the end of the first year. January 24, 2013 21. Zaki has a bank account balance of X on January 1, 2010. During the next two years Zaki deposits...
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