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EXAMPLE 4
Money is invested for five years in a savings account earning 7% effective. If the rate of inflation
is 10% find the percentage of purchasing power lost during the period of the investment.
An equation of value involves - PV, FV, Interes
LECTURE 5
EXAMPLE 1
An account pays $1,500 at the end of 10 years at 5% per annum convertible monthly.
How much was deposited initially?
EXAMPLE 2
In return for a promise to receive $1,000 at the end of 5 years a person agrees to pay $100
at once, $400 at
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- Outstanding principal
- Unpaid balance
- Remaining loan indebtedness
Suppose a loan of amount L to be repaid at the end of n time periods by payments at the end
of each period. Assume these payments are LEVEL except possibly for final payment.
P
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A savings account start with $1,000 and has a level annual effective discount rate of 6.4%. Find the
accumulated value at the end of five years.
Latisha wishes to obtain $4,000 to pay her college tuition now. She qualifies for a loan with a level
a
MATH 4410
LECTURE 1
1.3, 1.4, 1.5
EXAMPLE 1
Assume
(a) A(t ) = 300(1 + 0.05t )
(b) A(t ) = 300(1.05) t
Find i = i1
and
i5
EXAMPLE 2
Find the accumulated value of $1,500 invested for 3 years if the simple
MATH 4410
LECTURE 6
EXAMPLE 1
An investor makes a single deposit of $10,000 into Fund A for 10 years which earns a 6% effective rate of
interest payable directly to the investor each year. During the first 5 ye
MATH4410
LECTURE2
1.6,1.7,1.8
EXAMPLE1
Assumethesameamountfunctionsasinexample1,Lecture1.
Find d = d1
and
d 5 (theeffectivediscountratesforthefirstandfifthtimeperiods)
EXAMPLE2
Howmuchmustbeinvestedataneffectiveinterestrateof5%perannumtoaccumulateto$100at
MATH 4410
LECTURE 3
EXAMPLE 1 (Text, p66, Q2)
Latisha wishes to obtain $4,000 to pay her college tuition now. She qualifies for a loan with a level
annual effective discount rate of 3.5%.
(a) How much will s
LECTURE 22 EXAMPLES
EXAMPLE 1
A company owes $100 to be paid at times 2, 4, and 6. The company plans to meet the
obligation with an investment program that produces asset cash flows of A1 at time 1 and
A5 at time 5. The effective rate of interest is 10%
(
LECTURE 21 EXAMPLES
EXAMPLE 1 (MATCHING WITH ZERO COUPON BONDS)
Several years ago ABC corporation entered into a 10-year lease agreement under which
ABC committed to make 10 annual lease payments. The first payment was $840,000 and
each payment thereafter
LECTURE 20
EXAMPLE 1
A $100 par-value 10% preferred stock with quarterly dividends is bought to yield
8% convertible quarterly into perpetuity. However, the preferred stock is actually
called at the end of 10 year
LECTURE 13 EXAMPLES
EXAMPLE 1
A perpetuity has payments at the end of each four year period. The first payment at the end of four
years is 1. Each subsequent payment is 5 more than the previous payment. It
EXAMPLE 1
A $1,0000 par value 20 year bond with coupons at 8% payable semi-annually
has a redemption value of $1100 and is bought to yield 6% convertible semi-annually.
Find the purchase price.
EXAMPLE 2
You own a $10,000 face value bond whose redemption
LECTURE 19 EXAMPLES
EXAMPLE 1 (Text, 5.4,Q2)
A loan of $12,500 is made at an effective interest rate of 8.5%.
Payments are made at the end of each interest period. Each payment
equals twice the interest due unt
LECTURE 18 EXAMPLES
EXAMPLE 1
A 10-year bond with semi-annual coupons is bought at a discount to yield 9% semiannually. If the amount for accumulation of discount in the next-to-last coupon is $8,
find the total amount for accumulation of discount during
LECTURE 15 EXAMPLES
EXAMPLE 1
Consider a loan of amount a n at interest rate i per period being repaid with level
payment so 1 at the end of each period form n periods. Complete an amortization
schedule.
EXAMPLE 2
A building valued at $200,000 is purchase