Compound Interest
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Here are the exercises: Can you also briefly explain why with 2-3 sentences, Thank you I am trying to better understand it.
1.
(Compound interest) To what amount will the following investments accumulate? Why you think this way?
a. $5,000 invested for 10 years at 10 percent compounded annually
b. $8,000 invested for 7 years at 8 percent compounded annually
c. $775 invested for 12 years at 12 percent compounded annually
d. $21,000 invested for 5 years at 5 percent compounded annually
2.
(Present value) What is the present value of the following future amounts? why ?
a. $800 to be received 10 years from now discounted back to the present at 10 percent
b. $300 to be received 5 years from now discounted back to the present at 5 percent
c. $1,000 to be received 8 years from now discounted back to the present at 3 percent
d. $1,000 to be received 8 years from now discounted back to the present at 20 percent
3.
(Compound annuity) What is the accumulated sum of each of the following streams of payments? can you show me how to calculate?
a. $500 a year for 10 years compounded annually at 5 percent
b. $100 a year for 5 years compounded annually at 10 percent
c. $35 a year for 7 years compounded annually at 7 percent
d. $25 a year for 3 years compounded annually at 2 percent
4.
(Present value of an annuity) What is the present value of the following annuities? how do you find out the Presen Value ?
a. $2,500 a year for 10 years discounted back to the present at 7 percent
b. $70 a year for 3 years discounted back to the present at 3 percent
c. $280 a year for 7 years discounted back to the present at 6 percent
d. $500 a year for 10 years discounted back to the present at 10 percent
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Education
- BE, Bangalore University, India
- MS, University of Wisconsin-Madison
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