Suppose you have an opportunity to invest in a fund that pays 11% interest compounded annually. Today, you invest$5,000 into this fund. Three years later (EOY 3), you borrow $2,500 from a local bank at 6% annual interest and invest it in the fund. Two years later (EOY 5), you withdrawenough money from the fund to repay the bank loan and all interest due on it. Three years from this withdrawal (EOY 8) you start taking $1,000 per year out of the fund. Afterfive withdrawals of $1,000, you have withdrawn your original $5,000. The amount remaining in the fund is earned interest. How much remains?Click the icon to view the interest and annuity table for discrete compounding when i = 6% per year.Click the icon to view the interest and annuity table for discrete compounding when i= 11% per year.www

Step 1: The remaining amount can be found as follows: Sl. No.ABCDEFGHI1Investment 5,000.00…

Answered: Suppose you have an opportunity to…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Similar questions

How much should you invest each month in order to have $700,000 if your rate of return is 3.6% compounded monthly and you want to achieve your goal in 40 years?How much interest will you earn?How much should you invest each month in order to have $700,000 if you want to achieve your goal in 20 years?If you deposit the amount you need to achieve your goal in 20 years, how much will your savings be worth after 10 years?
Today, you invest P100,000 into a fund that pays 25% interest compounded annually. Three years later you borrow P50,000 from a bank at 20% annual interest and invest the fund. Two years later, you withdraw enough money from the fund to repay the bank loan and all interest due on it. Three years from this withdrawal, you start taking P20,000 per year out of funds. After five withdrawals, you withdraw the balance in the fund. How much was withdrawn? Kindly provide a CLEAR and COMPLETE answer.
Your rich uncle has just given you a high school graduation present of $500,000. The present, however, is in the form of a 25-year bond with an annual interest rate of 2.6% compounded annually. The bond says that it will be worth $500,000 in 25 years. What is this gift worth at the present time? (Round your answer to the nearest cent.)$
Jon’s grandfather was planning to give him $11,000 in 14 years. Jon has convinced him to pay him $7,000 now, instead. If Jon invests this $7,000 at 6.5% compounded continuously how much money will he have in 14 years? a) What type of problem is this? Select an answer Future Value -Simple Interest Future Value - Compound Interest Future Value - Continuously Compounded Future Value - Ordinary Annuity Future Value - Annuity Due Present Value - Ordinary Annuity Present Value - Annuity Due b) How much will he have? (round to the nearest cent) $
On January 1, 2005, a person’s savings account was worth $200,000. Every month thereafter, this person makes a cash contribution of $676 to the account. If the fund was expected to be worth $400,000 on January 1, 2010, a) what monthly rate of interest was being earned on this fund? Answer is Blank 1 b) what is the nominal rate compounded monthly? Answer is Blank 2 c) What is the equivalent effective interest rate per year? Answer is Blank 3
In one instance, a financial institution loaned you $60,000 for two years at an APR of 5.75% for which you must make monthly payments. In a second instance, you loaned a financial institution $60,000 for two years at an APR of 5.75% compounded monthly. What is the difference in the amount of interest paid? (Round your answer to the nearest cent.)
Patricia French received $500,000 from an insurance company after her husband's death. Patricia wants to deposit this amount in a savings account that earns interest at a rate of 5% compounded monthly. Then she would like to make 120 equal monthly withdrawals over the 10-year period such that, when she makes the last withdrawal, the savings account will have a balance of zero. How much can she withdraw each month? ..... The required amount of deposit is $ (Round to the nearest dollar.)
Suppose you owe $1,100 on your credit card. The annual percentage rate (APR) is 18%, compounded monthly. The credit card company says your minimum monthly payment is $20.00. a. If you make only this minimum payment, how long will it take for you to repay the $1,100 balance (assuming no more charges are made)? b. If you make the minimum payment plus $10.62 extra each month (for a total of $30.62), how long will it take to repay the $1,100 balance? c. Compare the total interest paid in Part (a) with the total interest paid in Part (b). a. It will take b. It will take (...) months for you to repay the initial balance. (Round to the nearest whole number.) months for you to repay the initial balance. (Round to the nearest whole number.) c. The difference in the total interest paid in Part (a) and Part (b) is $ (Round to the nearest dollar.)
What rate of interest compounded annually would result in receipt of $22,110 in seven years from an investment of $10,000 made now?
Suppose you deposit $35,000 in an account today that pays 3.78% interest, compounded annually. How long does it take before the balance in your account is $76.000?
Suppose you borrowed $10, 000 at an interest rate of 12% compounded monthly over 48 months. At the end of the first year (after 12 payments), you want to negotiate with the bank to pay off the remainder of the loan in 12 equal quarterly payments. What quarterly payment must be made if the nominal interest rate (12%) and compounding frequency (monthly) remain the same? Please explain well. Show cash flow diagram
Jimmy Carpenter, a self-employed individual, is opening a retirement account at a bank. His goal is to accumulate $1,000,000 in the account by the time he retires from work in 20 years ‘time. A local bank is willing to open a retirement account that pays 8% interest compounded annually throughout the 20 years. Jimmy expects that his annual income will increase 6% yearly during his working career. He wishes to start with a deposit at the end of year 1 and increase the deposit at a rate of 6% each year thereafter. a. What should be the size of his first deposit The first deposit will occur at the end of year 1, and subsequent deposits will be made at the end of each year. The last deposit will be made at the end of year 20.b. What is the value of A if the bank decides to decrease the interest rate to 6% compounded annually.

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