Question
In: Finance
a.Calculate the amount of money that will accumulate if Leslie leaves the money in the bank...
a.Calculate the amount of money that will accumulate if Leslie leaves the money in the bank for 2, 6, and 16 years
.b. Suppose Leslie moves her money into an account that pays 9 percent or one that pays 11 percent. Rework part (a ) using 9 percent and 11 percent.
c. What conclusions can you draw about the relationship between interest rates, time, and future sums from the calculations you just did?
a. After placing $9,800 in a savings account paying annual compound interest of 7 percent, the amount of money that will accumulate if Leslie leaves the money in the bank for
2 year(s) is 11,220.02.
(Round to the nearest cent.)
If she leaves the money in the bank for 6 years, the amount of money that will accumulate is $
If she leaves the money in the bank for 16 years, the amount of money that will accumulate is $
Solutions
Expert Solution
| Future value or accumulated value is the amount that would be received after certain period of time on investments made | ||||||||||
| Future value = Present value*((1+r)^n) | ||||||||||
| where r is the interest rate | ||||||||||
| n is the number of years | ||||||||||
| a) If interest rate is 7% and number of years is 2 years, accumulated value is shown below | ||||||||||
| Future value | 9800*(1.07^2) | |||||||||
| Future value | If interest rate is 7% and number of years is 6 years, accumulated value is shown below | |||||||||
| The accumulated value would be $11,220.02 | ||||||||||
| If interest rate is 7% and number of years is 6 years, accumulated value is shown below | ||||||||||
| Future value | 9800*(1.07^6) | |||||||||
| Future value | $14,707.16 | |||||||||
| The accumulated value would be $14,707.16 | ||||||||||
| If interest rate is 7% and number of years is 16 years, accumulated value is shown below | ||||||||||
| Future value | 9800*(1.07^16) | |||||||||
| Future value | $28,931.20 | |||||||||
| The accumulated value would be $28,931.20 | ||||||||||
| b) | ||||||||||
| If interest rate is 9% and number of years is 2 years, accumulated value is shown below | ||||||||||
| Future value | 9800*(1.09^2) | |||||||||
| Future value | $11,643.38 | |||||||||
| The accumulated value would be $11,643.38 | ||||||||||
| If interest rate is 11% and number of years is 2 years, accumulated value is shown below | ||||||||||
| Future value | 9800*(1.11^2) | |||||||||
| Future value | $12,074.58 | |||||||||
| The accumulated value would be $12,074.58 | ||||||||||
| c) | ||||||||||
| With the increase in interest rates and the number of years being same, the future value of the savings increases that is increase in interest rate increases future value | ||||||||||
| Therefore, interest rates and future value has direct relationship | ||||||||||
| With the increase in number of years of investment and the interest rate being same, the future value of the savings increases that is with increase in time the future value would be more | ||||||||||
| Therefore, time and future value has direct relationship | ||||||||||
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Step1: Asset Commonwealth Bank ANZ Bank NAB Bank Average Amount (m) % Amount (m) % Amount...
Step1:
Asset
Commonwealth Bank
ANZ Bank
NAB Bank
Average
Amount
(m)
%
Amount
(m)
%
Amount (m)
%
Amount
(m)
%
Cash
42,814
4.47%
68,048
7.58%
42,152
5.18%
51,004.67
5.73%
Interbank loans
8,678
0.91%
5,504
0.61%
35,030
4.30%
16,404.00
1.84%
Trade securities
31,127
3.25%
43,605
4.86%
45,637
5.60%
40,123.00
4.51%
Investment securities
79,019
8.24%
69,384
7.73%
42,029
5.16%
63,477.33
7.13%
Loans
647,503
67.53%
574,331
64.00%
468,277
57.49%
563,370.33
63.28%
Other assets
148,711
15.61%
136,454
15.21%
181,391
22.27%
155,852.00
17.51%
Total...
Asset Commonwealth Bank ANZ Bank NAB Bank Average Amount (m) % Amount (m) % Amount (m)...
Asset
Commonwealth Bank
ANZ Bank
NAB Bank
Average
Amount
(m)
%
Amount
(m)
%
Amount (m)
%
Amount
(m)
%
Cash
42,814
4.47%
68,048
7.58%
42,152
5.18%
51,004.67
5.73%
Interbank loans
8,678
0.91%
5,504
0.61%
35,030
4.30%
16,404.00
1.84%
Trade securities
31,127
3.25%
43,605
4.86%
45,637
5.60%
40,123.00
4.51%
Investment securities
79,019
8.24%
69,384
7.73%
42,029
5.16%
63,477.33
7.13%
Loans
647,503
67.53%
574,331
64.00%
468,277
57.49%
563,370.33
63.28%
Other assets
148,711
15.61%
136,454
15.21%
181,391
22.27%
155,852.00
17.51%
Total assets...
Asset Commonwealth Bank ANZ Bank NAB Bank Average Amount (m) % Amount (m) % Amount (m)...
Asset
Commonwealth Bank
ANZ Bank
NAB Bank
Average
Amount
(m)
%
Amount
(m)
%
Amount (m)
%
Amount
(m)
%
Cash
42,814
4.47%
68,048
7.58%
42,152
5.18%
51,004.67
5.73%
Interbank loans
8,678
0.91%
5,504
0.61%
35,030
4.30%
16,404.00
1.84%
Trade securities
31,127
3.25%
43,605
4.86%
45,637
5.60%
40,123.00
4.51%
Investment securities
79,019
8.24%
69,384
7.73%
42,029
5.16%
63,477.33
7.13%
Loans
647,503
67.53%
574,331
64.00%
468,277
57.49%
563,370.33
63.28%
Other assets
148,711
15.61%
136,454
15.21%
181,391
22.27%
155,852.00
17.51%
Total assets...
In order to accumulate enough money for a down payment on a house, a couple deposits...
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following information:
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The loan will be fully amortized in 3 years at 12%.
Marginal tax rate is 20%.
(i) What is the interest payment in the 1st year?
a.
$12,672.00
b.
$13,200.00
c.
$10,560.00
d. None of the
answers are correct
(ii) What is the principal payment in the 1st
year?
a.
$20,862.97
b.
$20,041.13
c.
$4,400.00
d. $26,078.71...
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