Question

In: Finance

4.(a) Sarah has decided to deposits $20 per month into a savings account that pays interest...

4.(a) Sarah has decided to deposits $20 per month into a savings account that pays interest at a rate of 2.2% per year, compounded semi-annualy.How much she has deposited over 5 years? How much will she have at the end of 5 years?

(b) On the top of her savings, end the end of every year, Sarah receives gift from her grandfather at the amount of $200. How much will she have at the end of 5 years?

(c) Continue with part a). If Sarah wants to be a millionaire in 10 years,how much she has to save every day if the annual interest rate is 2.2%compounded semi-annually?

Solutions

Expert Solution

Here the interest is compounded semi annually but periodic payments are monthly, yearly and daily.

Hence, effective interest rate has been computed and corresponding rate has been used in the formula.

Number of days is assumed to be 365.

Formulae are provided for ease of reference.


Related Solutions

Mary made five annual deposits of $8000 in a savings account that pays interest at a...
Mary made five annual deposits of $8000 in a savings account that pays interest at a rate of 6% per year. One year after making the last deposit, the interest rate changed to 15% per year. Five years after the last deposit, how much accumulated money can she withdraw from the account?draw the cash flow diagram.
The local bank pays 4% interest on savings deposits. In a nearby town, the bank pays...
The local bank pays 4% interest on savings deposits. In a nearby town, the bank pays 1% per quarter. A man who has $2945 to deposit wonders whether the higher interest paid in the nearby town justifies driving there. If all money is left in the account for 3 years, how much more money would he obtain if the out-of-town bank was chosen?
Someone deposits $200 every 6 months into an account that pays interest at 4% per year...
Someone deposits $200 every 6 months into an account that pays interest at 4% per year compounded quarterly. How much does this person have after 10 years?
In solving the following problem : The local bank pays 4% interest on savings deposits. In...
In solving the following problem : The local bank pays 4% interest on savings deposits. In a nearby town, the bank pays 1% per quarter. A man who has $3000 to deposit wonders whether the higher interest paid in the nearby town justifies driving there. 1. How much will the man receive after 2 years if he used the local bank? The answer is closest to: $3123 $3246 $3060 $3186 Q2) What sum of money now is equivalent to $8250...
A person deposits $100 per month into a savings account for 2 years. If $75 is...
A person deposits $100 per month into a savings account for 2 years. If $75 is withdrawn in months 5, 7 and 8 (in addition to the deposits), construct the cash flow diagram to determine how much will be in the account after 2 years at i = 6% per year, compounded quarterly. Assume there is interperiod interest
a)         Jasmine makes quarterly deposits of $1,000 into a savings account that pays 4 percent compounded...
a)         Jasmine makes quarterly deposits of $1,000 into a savings account that pays 4 percent compounded monthly. How much money will she have in her account in 25 years? Jasmine makes monthly deposits of $1,000 into an investment account that pays 4 percent compounded quarterly. How much money will she have in her account in 25 years? Gabriel deposits $1,000 at the beginning of each month into an investment account that pays 4 percent compounded monthly. How much money will...
Erica has her savings in a bank account that pays 4.0% interest per year. She is...
Erica has her savings in a bank account that pays 4.0% interest per year. She is considering buying stock in a pharmaceuticals company that is developing a cure for cellulite. Her research indicates that she could earn 45% in one year if the cure is successful or lose 65% in one year if it is not. At what probability of success would the pharmaceuticals stock be the better choice? (Round your answer to two decimal places.)
An individual initially deposits $4,000 into an account that pays interest at 8% per year compounded...
An individual initially deposits $4,000 into an account that pays interest at 8% per year compounded quarterly. A $200 deposit is made in the first month of the second year with deposits increasing by $40 per month until the end of the third year. Beginning in the first month of the fifth year, withdrawals of $100 per month are taken out of the account until the end of the fifth year. Compute the amount of money in the account to...
A savings plan requires 48 deposits of $500 per month commencing today. If the interest rate...
A savings plan requires 48 deposits of $500 per month commencing today. If the interest rate is 14.9% p.a compounding monthly, the value of the investment plan in exactly 4 years from today will be closest to: Select one: a. $32948.94 b. $32544.84 c. $2864.52 d. $2493.06
The local bank pays 5% interest on savings deposits. In a nearby town, the bank pays...
The local bank pays 5% interest on savings deposits. In a nearby town, the bank pays 1.25% per quarter. A man who has $4000 to deposit wonders whether the higher interest paid in the nearby town justifies driving there. If all money is left in the account for 3 years, how much interest would he obtain from the out-of-town bank?
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT