Homework

The amount of money that I had spent over one week ended up totaling $100.77. To come up with the amount of money that would be spent in a year if I spent $100.77 for 52 weeks, the total would be $5,240.04. Then to determine the amount of money that would be spent over 25 years, it would be $5,240.04 multiplied by 25 years, and that would be $131,001. That is $131,001 that I spent on completely unnecessary expenses. To determine what $131,001 would equal in todays money it requires to be plugged into an equation, PV=FV/(1+i)^n . “FV” stands for the future value, that is the value that we calculated by multiplying by 25 years, $131,001. The “i” stands for the interest

What annual interest rate is needed to produce $200,000 after five years if only $100,000 is invested?

In Question 6, the payment occurs at the beginning of each period rather than at the end, this type of annuity is named as annuity due.

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

The interest rate expressed as if it were compounded once per year is called the _____ rate.

21. If you invested $100,000 in a one year certificate of deposit that pays 5% interest compounded semiannually, what would be your balance after one year (rounded)?

for $100,000. If interest is compounded continuously, what annual nominal rate of interest did the

Table PV of $1 Face value of the bond n=10; i=6% PV of Ordinary Interest (annuity) Annuity of $1 n=10; i=6% Price of bonds Cash Flow Table Value Amount Present Value

When the compounding frequency increases (interest is paid more often), the future value of the investment will

It is something that can be found from credit rates to the banks, interest rates, and plans. Despite the fact that most have little to no knowledge on this subject and because this concept is prominent in business transactions, more people should seek a greater understanding of compound interest. Learning about interest rates would benefit a person greatly as they would better understand what it takes to pay off their interest and debts on credit card and loans. They will also be able to better understand how to invest their money, and how to get the biggest profit and reward out of their

Interest rate is the amount of interest due per period, as a proportion of the amount lent, deposited or borrowed (called the principal sum). The total interest on an amount lent or borrowed depends on the principal sum, the interest rate, the compounding frequency, and the length of time over which it is lent, deposited or borrowed (Wikipedia).

As we discussed earlier, after investing $100 in a savings account at your local bank yielding 6% annually, you will have $106. The $6 earned is the interest on the initial deposit of $100. Interest is the “rent” paid for the use of money for some period of time, (Spiceland, Sepe, Nelson, pp. 322). Interest is also a surcharge on the repayment of borrowed money, the return derived from an investment, or the right to claim in a corporation such as that of creditor or owner. When we borrow money, interest is typically paid to the lender as a percentage of the principal or the amount owed to the lender, so, the larger the principal, the larger the dollar amount of principal. The interest rate is the percentage of the principal that is paid as a fee over a certain period of time (typically one month or year). If interests are high, the larger the amount of interest received. And the longer the funds remain in an account, the larger the dollar amount of interest. Because the bank is using the deposited funds, the

Savings accounts draw interest on the balance of the account, usually for a year's time. Suppose $100 is invested today at a 5% interest rate. After one year, it will draw interest of $5, bringing the balance to a worth of $105 (100 x 1.05). Savings accounts also operate on compounded interest if the principal and interest are left in the account over the long term. The second year would be worth $110.25 (105 x 1.05).

In other words, an initial amount such as $1000 which has a fixed rate of return of 20% will double itself in just over three and a half years, 72/20 = 3.6.

     Most People have money in a savings account and wonder how to figure out the actual interest rates or the APR (annual percentage yield). To find the amount of interest you would use this formula: P (principle) x R (rate) x T (time) = I (interest)