In: Finance
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?
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% |