12. a) Suppose on January 1 you deposit $2,750 in an account that pays a quoted...

12. a) Suppose on January 1 you deposit $2,750 in an account that pays a quoted interest rate of 2.35% (APR), with interest added (compounded) daily. How much will you have in your account on October 1, or after 9 months? (assume N = 273 days) Recall that the interest rate (I/Y) represents the periodic rate based on how many times per YEAR the interest is compounded. Hint, this is 365 times per year. As above, and all TVM type problems, there should be no interim rounding of the interest rates.

b) Now suppose you leave your money in the bank for 21 months. Thus, on January 1 you deposit $2,750 in an account that pays an APR of 2.35% compounded daily. How much will be in your account on October 1 of the following year? (assume N = 638 days)

Solutions

Expert Solution

12. a) PV =2750
Number of Years =273
APR =2.35%/365
Amount in Oct 1 =PV*((1+r)^n =2750*((1+2.35%/365)^273 =2798.76

b) Amount in Oct 1 next year =PV*((1+r)^n =2750*((1+2.35%/365)^638 =2865.31

jeff jeffy answered 2 years ago

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