Question

In: Finance

Can someone please teach me how to do these? 5. Suppose you save $19,000 per year...

Can someone please teach me how to do these?

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

5)

A/c balance after 35 years P×[(1+r)^n-1]÷r
Here,
A Interest rate per annum 7.625%
B Number of years                                                            35
C Number of payments per per annum                                                              1
A÷C Interest rate per period ( r) 7.625%
B×C Number of periods (n) 35
Payment per period (P) $                                               19,000
A/c balance after 35 years $         3,012,748.71
19000×((1+7.63%)^35-1)÷7.63%

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