1. Suppose we put a $6000 inheritance into a savings account that pays us compound interest with QUARTERLY compounding at a rate of 6% APR. We set a goal of saving up money for the next six years for a car, a vacation, or for a down payment for a house. We set our total savings goal to be $20,317 or within one dollar of this. a. How much money will we need to deposit (i.e. save) each quarter in order to meet our savings goal? b. Use dimensional analysis to convert the answer in part (a) to a monthly deposit. Round to the nearest penny. Use some of these facts: 60 sec = 1 min 60min - 1 hour 4quarters - 1 year 12months = 1 year 365days - 1 year 52 weeks - 1 year c. How much total interest do we earn? d. Your savings account is going up and up exponentially (ish) be three different parties/forces/factors have contributed to your savings account. Fill in the blanks below with the appropriate information. I did the first one for you as an example. i. Inheritance: your savings account grew (just one time) by 6000$ be your grandparents contributed this money. ii. Interest: your savings account in total grew by (how much) be money) contributed this money. (who/what contributes this iii. Deposits: your savings account in total grew by (how much) be (who/what contributes this money) contributed this money. iv. Total up the three amounts above. What do you notice about this total amount?
1. Suppose we put a $6000 inheritance into a savings account that pays us compound interest with QUARTERLY compounding at a rate of 6% APR. We set a goal of saving up money for the next six years for a car, a vacation, or for a down payment for a house. We set our total savings goal to be $20,317 or within one dollar of this. a. How much money will we need to deposit (i.e. save) each quarter in order to meet our savings goal? b. Use dimensional analysis to convert the answer in part (a) to a monthly deposit. Round to the nearest penny. Use some of these facts: 60 sec = 1 min 60min - 1 hour 4quarters - 1 year 12months = 1 year 365days - 1 year 52 weeks - 1 year c. How much total interest do we earn? d. Your savings account is going up and up exponentially (ish) be three different parties/forces/factors have contributed to your savings account. Fill in the blanks below with the appropriate information. I did the first one for you as an example. i. Inheritance: your savings account grew (just one time) by 6000$ be your grandparents contributed this money. ii. Interest: your savings account in total grew by (how much) be money) contributed this money. (who/what contributes this iii. Deposits: your savings account in total grew by (how much) be (who/what contributes this money) contributed this money. iv. Total up the three amounts above. What do you notice about this total amount?
Chapter11: Capital Budgeting Decisions
Section: Chapter Questions
Problem 3PB: Use the tables in Appendix B to answer the following questions. A. If you would like to accumulate...
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Transcribed Image Text:1. Suppose we put a $6000 inheritance into a savings account that pays
us compound interest with QUARTERLY compounding at a rate of
6% APR. We set a goal of saving up money for the next six years for
a car, a vacation, or for a down payment for a house. We set our total
savings goal to be $20,317 or within one dollar of this.
a. How much money will we need to deposit (i.e. save) each
quarter in order to meet our savings goal?
b. Use dimensional analysis to convert the answer in part (a) to a
monthly deposit. Round to the nearest penny.
Use some of these facts: 60 sec 1 min 60min 1 hour
12months = 1 year 4quarters - 1 year
365days - 1 year
52 weeks 1 year
c. How much total interest do we earn?
d. Your savings account is going up and up exponentially (ish) be
three different parties/forces/factors have contributed to your
savings account. Fill in the blanks below with the appropriate
information. I did the first one for you as an example.
i. Inheritance: your savings account grew (just one time) by
6000$ be your grandparents contributed this money.
ii. Interest: your savings account in total grew by
(how much)
money) contributed this money.
(who/what contributes this
iii. Deposits: your savings account in total grew by
(how much) be
(who/what
contributes this money) contributed this money.
iv. Total up the three amounts above. What do you notice
about this total amount?
e. Let's pretend that after making exactly three years of deposits
(same deposits and situation as above) we can no longer afford
our quarterly deposits to our savings so we just stop making
those. We decide to leave the money alone and let it sit there and
grow until our six years of savings time is up. How much money
will we have saved up in total if this situation happens?
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