Take the current amount you have in your checking or savings account. Suppose you have a choice of keeping your money for five years in a savings account with a 2% interest rate, or in a five year certificate of deposit with and interest rate of 4.5%. Calculate how much interest you would earn with each option over five years time with continuous compounding. I’m going to do this for my checking and savings account amount Checking Account

A = Ce^RT My total money in the checking account is 2100 dollars Since the formula for the continuous compounding is A=Ce^RT where C is the initial deposit or capital, T for time, R is the rate of interest and A will be the final amount. Capital = 2100, Interest Rate ( R) = 2% Time (T) = 5 years, e = 2.7182818284 When money kept for five years in a savings account with a 2% interest rate: By using the values into formula:= 2100 e ^(0.02*5) = 2318.57 Interest earned = 2318.57 – 2100 = 218.57 dollars

Five year certificate of deposit with interest rate of 4.5%.So A = Ce^RT 2100e^4.5*5=2680.19 - 2100=$516.98

Savings Account = P*e^rt = Pe^(0.02*5) = Pe^0.1 = 1.105171P Therefore, Interest = A - P = 0.105171P
Amount with certificate of deposit account = P*e^rt = Pe^(0.045*5) = Pe^0.225 = 1.252323P
Therefore, Interest = A - P = 0.252323P
A = 10,000e^(.02*5) = $11051.71 return stocks I have the...

...commencing at age 60 and ending at age 67
Plan 1:
V0 * (1.06)42 = 3,000,000
V0 = 3,000,000/(1.06)42
V0 = $259,582.20
Plan 2:
V0 * (1.06)17 = 3,000,000
V0 = 3,000,000/(1.06)17
V0 = $1,114,093.26
Plan 3:
C * Annuity Compound Factor (6%, 37) = 3,000,000
C * [((1.06)37 – 1)/0.06] = 3,000,000
C *127.27 = 3,000,000
C = $23,572.28
Plan 4:
C * Annuity Compounding Factor (6%,17) = 3,000,000
C * 28.21 = 3,000,000
C = $106,334.41...

...13.1 CompoundInterest
• Simple interest – interest is paid only on the
principal
• Compoundinterest – interest is paid on both
principal and interest, compounded at regular
intervals
• Example: a $1000 principal paying 10% simple
interest after 3 years pays .1 3 $1000 = $300
If interest is compounded annually, it pays .1
$1000 = $100 the first...

... because
log(0.1) = -1
log(1) = 0
log(100) = 2
log(1000) = 3
So the graph will be much easier to read.
Logarithms are used in a lot of places to scale numbers when there's a big range between the smallest and the largest numbers of interest, which makes them easier to talk about.
y=yi x e^-kt
where:
y - different between temprature of body and the constant temp of room
yi - initial temprature difference of body and room
e - eulers number (2.718...)
t -...

...Chapter 5 : Interet rates
Page161
Interest rate quotes and adjustments
5-1. Your bank is offering you an account that will pay 20% interest in total for a two-year deposit. Determine the equivalent discount rate for a period length of
a. Six months.
b. One year.
c. One month.
a. Since 6 months is [pic] of 2 years, using our rule [pic]
So the equivalent 6 month rate is 4.66%.
b. Since one year is half of 2 years [pic]
So the equivalent...

...year. The firm net fixed assets of $161,900. What is the amount of the net working capital?
3. Kaylor Equipment Rental paid $75 in dividends and $511 in interest expense. The addition to retained earnings is $418 and net new equity is $500. The tax rate is 35 percent. Sales are $15,900 and depreciation is $680. What are the earnings before interest and taxes?
4. The Widget Co. purchased new machinery three years ago for $4 million. The machinery can be sold to...

...COMPOUNDINTEREST
Making or Spending Money
SIMPLE INTEREST FORMULA
If a principal of P dollars is borrowed for a
period of t years at a per annum interest rate
r, expressed as a decimal, then interest I
charged is
I Pr t
This interest is not used very often. Interest is
usually compounded which means interest
is charged or given on the interest and the...

...your
objectives? Assume interest remains at 9%. [Rs.1254]
2. You can deposit Rs.4000 per year into an account that pays 12% interest. If you
deposit such amounts for 15 years and start drawing money out of the account in
equal annual installments, how much could you draw out each year for 20 years?
[Rs.19964.12]
3. What is the value of a Rs.100 perpetuity if interest is 7%? [Rs.1428.57]
4. You deposit Rs.13,000 at the beginning of every year...

...A) B) Answer C) D)
1. What is the simple interest for a principal of $620 invested at a rate of 7% for 3 years? $173.60 $130.20 $172.60 $129.20
A) B) C) Answer D) E)
2. If you borrow $1100 for 5 years at 14% annual simple interest, how much must you repay at the end of the 5 years? $770.00 $2215.13 $2117.96 $77,000 $1870.00
A)Answer B) C) D)
3. How much interest is earned in 5 years on $2,900 deposited in an account paying 7.1%...

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