1. James deposits $200 in a bank account on the last day of each month. He...

1. James deposits $200 in a bank account on the last day of each month. He increases the deposit by $10 each month. The payments continue for a period of 36 months.

What is the present value of these payments on the day of the first payment (to the nearest dollar)? The nominal interest rate is 8% compounded monthly.

2. $1000 accumulates to $1500 in 5 years time and the rate of inflation is 3% p.a.

What is the annual effective real rate of return?

Solutions

Expert Solution

(1) Annual Rate = 8%, Compounding Frequency: Monthly, Applicable Monthly Rate = 8/12 = 0.67 %

NOTE: Please raise a separate query for the solution to the second unrelated question, as one query is restricted to the solution of only one complete question with up to four sub-parts.

jeff jeffy answered 4 weeks ago

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