# Assingment 2.1

816 Words Sep 1st, 2014 4 Pages
Assignment 2.1

E5-1
Assumed a firm makes a \$2,500 deposit into its money market account. If this account is currently paying 0.7% (yes, that’s right, less than 1%!), what will the account balance be after 1 year?

E5-2
If Bob and Judy combine their savings of \$1,260 and \$975, respectively, and deposit this amount into an account that pays 2% annual interest, compounded monthly, what will the account balance be after 4 years?

E5-3
Gabrielle just won \$2.5 million in the state lottery. She is giving the option of receiving a total of \$1.3 million now, or she can elect to be paid \$100,000 at the end of each of the next 25 years. If Gabrielle can earn 5% annually on her
He has plenty of money but little financial sense. He received a gift of \$12,000 for his recent graduation and is looking for a bank in which to deposit these funds. Partners' Savings Banks offers an account with an annual interest rate of 3% compounded semiannually, while Selwyn's offers an account with a 2.75% annual interest rate compounded continiously. Calculate the value of the two accounts at the end of one year, and recommend to Joseph which account he should choose.

In the first option investing the \$12,000 with an annual interst rate compounded semiannually will have at the end of the year \$12,730.80.

In the second option investing the \$12,000 with a 2.75% annual interest rate compounded continiously he will have at the end of the year \$12,365.45.
I believe is in the best interest for Joseph to go with the first option that will result at the end of the year in \$12,730.80.

E5-6

Jack and Jill have just had their first child. If college is expected to cost \$150,000 per year in 18 years, how much should the couple begin depositing annually at the end of each year to accumulate enough funds to pay the first year's tuition at the beginning of the 19th year? Assume that they can earn a 6% annual rate of return on their investment.

Jack and Jill have to deposit annually at the end of each year \$4,853.00 to achieve their goal of \$150,000 in 18 years.

In this journey of personal discovery in the finance world I came across a variety of very