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3. What is the future value of $15,000 saved at i=38.45% , compounded semi-annually in 2...

3. What is the future value of $15,000 saved at i=38.45% , compounded semi-annually in 2 years?

4. What is the future value of $15,000 saved at i=38.45% , compounded quarterly in 2 years?

5. Suppose you save $19,000 per year in an ordinary annuity promising you an interest rate of i=7.625% compounded once per year. How much will you have after 35 years?

6. A risk-free bond will pay you $1,000 in 1 year. The annual discount rate is i=19.69% compounded annually.  What is the bond’s present value?

7. A risk-free bond will pay you $1,000 in 2 years and nothing in between. The annual discount rate is i=67.5% compounded annually.  What is the bond’s present value?

Solutions

Expert Solution

3)

Future value PV×(1+r)^n
Here,
A Interest rate per annum 38.45%
B Number of years                                           2
C Number of compoundings per per annum                                           2
A÷C Interest rate per period ( r) 19.23%
B×C Number of periods (n)                                           4
Present value (PV) $                            15,000
Future value 30,308.23
15000×(1+19.23%)^4

jeff jeffy answered 1 year ago
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