Assingment 2.1

Beverly and Kyle Nelson currently insure their cars with separate companies paying $450 and $375 a year. If they insure both cars with the same company, they would save 10 percent on the annual premiums. What would be the future value of the annual savings over ten years based on an annual interest rate of 6 percent?

Poor Dog, Inc. borrowed $135,000 from the bank today. They must repay this money over the next six years by making monthly payments of $2,215.10. What is the interest rate on the loan? Express your answer with annual compounding.

II.|Connie has an investment portfolio in excess of $450,000. She pays Chris $350 to do an analysis of her investments and make recommendations on restructuring the portfolio.|

8. Karen has $16,000 that she wants to invest for 1 year. She can invest this amount at The North Bank and earn 5.50 percent simple interest. Or, she can open an account at The South Bank and earn 5.39 percent interest, compounded monthly. If Karen decides to invest at The North Bank, she will:

b. If you inherited $100,000 today and invested all of it in a security that paid an 8% rate of return, how much would you have in 15 years?

1. Consider the $50,000 excess cash. Assume that Gary invests the funds in one-year CD.

1b. You get the same prize but the choice changes to $5,000 now or $5,500 in three years. What do you do?

10. An investment of $1,000 today will grow to $1,100 in one year. What is the continuously compounded rate of return?

c) The present value of $500 to be received in one year when the opportunity cost rate is 8 percent (discounting):

1. If Mrs. Beach wanted to invest a lump sum of money today to have $100,000 when she retired at 65 (she is 40 years old today) how much of a deposit would she have to make if the interest rate on the C.D. was 5%?

After the calculations you end up coming out with a rate of 14.87%. The third and final part of question three asks what rate you will need if the interest is compounded semiannually. All you have to do is double the amount of terms and you will come out with a lower number of 7.177%. Since the interest is compounded semiannually that means that you will need to times that number by two and you come out with your final number of 14.35%.

(Compound annuity) what is the accumulated sum of each of the following streams of payme

The option mentioned in Q4 is to make one initial investment at the beginning of Year 1. The alternative to be discussed in question 5 is different.

1. Assume that at retirement you have accumulated $825,000 in a variable annuity contract. The assumed investment return is 5.5% and your life expectancy is 18 years. What is the hypothetical constant benefit payment?

First we need to get the present value of the annuity for the 1,500 semiannual PMTs at year 14