#### Details of this Paper

##### 1. A saver places \$1,000 in a certificate of depos...

Description

Solution

Question

1. A saver places \$1,000 in a certificate of deposit that matures after 20 years and that each year pays 4% interest, which is compounded annually until the certificate matures. (A) How much interest will the saver earn if the interest is left to accumulate? (B) How much interest will the saver earn if the interest is withdrawn each year? (C) Why are the answers to (A) and (B) different? 2. An investor bought a stock ten years ago for \$20 and sold it today for \$35. What is the annual rate of growth (rate of return) on the investment? 4. A saver wants \$100,000 after ten years and believes that it is possible to earn an annual rate of eight percent on invested funds. (A) What amount must be invested each year to accumulate \$100,000 if (!) the payments are made at the beginning of each year or (2) if they are made at the end of each year. (B) How much must be invested if the expected yield is only five percent. 9. You are offered \$900 five years from now or \$150 at the end of each year for the next five years. If you can earn six percent on your funds, which offer will you accept? If you can earn fourteen percent on your funds, which offer will you accept? Why are your answers different?

Paper#6815 | Written in 18-Jul-2015

Price : \$25