7. All of the following problems involve interest that is being compounded continuously. (a) Compute the interest rate needed in order to double an invest- ment every seven years. (b) With a 10% interest, how long will it take to triple my initial investment. (c) Irvin forgot what is the interest rate at his bank. All he knows is that after five years, his initial investment doubled. When will it triple? (Hint: There are two unknowns; one is the interest rate. Whenever there are two unknowns, two equations are needed. use the information about money at different times in an So, appropriate manner.) (d) A person has money withdrawn from his savings account to be placed in his checking account at a continuous basis. This is at a rate of $10,000 the savings account that has a 5% interest. How much will be in the savings account in one the growth of money needs to be derived. So, start with AM and, instead of the Eq. 2.4 expression, determine what AM equals in this setting. Then, solve the equation.) a year. This person started with $20,000 placed in year? (Hint: A different expression for

7. All of the following problems involve interest that is being compounded continuously. (a) Compute the interest rate needed in order to double an invest- ment every seven years. (b) With a 10% interest, how long will it take to triple my initial investment. (c) Irvin forgot what is the interest rate at his bank. All he knows is that after five years, his initial investment doubled. When will it triple? (Hint: There are two unknowns; one is the interest rate. Whenever there are two unknowns, two equations are needed. use the information about money at different times in an So, appropriate manner.) (d) A person has money withdrawn from his savings account to be placed in his checking account at a continuous basis. This is at a rate of $10,000 the savings account that has a 5% interest. How much will be in the savings account in one the growth of money needs to be derived. So, start with AM and, instead of the Eq. 2.4 expression, determine what AM equals in this setting. Then, solve the equation.) a year. This person started with $20,000 placed in year? (Hint: A different expression for

Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

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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Use the tables in Appendix B to answer the following questions. A. If you would like to accumulate $2,500 over the next 4 years when the interest rate is 15%, how much do you need to deposit in the account? B. If you place $6,200 in a savings account, how much will you have at the end of 7 years with a 12% interest rate? C. You invest $8,000 per year for 10 years at 12% interest, how much will you have at the end of 10 years? D. You win the lottery and can either receive $750,000 as a lump sum or $50,000 per year for 20 years. Assuming you can earn 8% interest, which do you recommend and why?
You put $250 in the bank for S years at 12%. A. If interest is added at the end of the year, how much will you have in the bank after one year? Calculate the amount you will have in the bank at the end of year two and continue to calculate all the way to the end of the fifth year. B. Use the future value of $1 table in Appendix B and verity that your answer is correct.
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You have an investment account that started with $2,000 10 years ago and which now has grown to $8,000. a. What annual rate of return have you earned (you have made no additional contributions to the account)? b. If the savings bond earns 13% per year from now on, what will the account's value be 10 years from now?
1. Suppose a deposit of R dollars is made at the end of each year, and assume an APR of r% compounding continuously. (a) If we invest like this for 3 years, what is the value of the account after the third year? (b) If we are making these payments for 3 years, how much money must we invest today to cover the payments? (c) If we make these payments in perpetuity, find a formula which describes the amount of principal we must invest today to cover all future payments. (d) If we invest like this for three years, but instead use an account with an APR s% compounded weekly, determine s so that this second account has the same value as your answer in part (a) after three years.
Assume that you can invest to earn a stated annual rate of return of 12 percent, but where interest is compounded semi-annually. If you make 20 consecutive semi-annual deposits of $500 each, with the first deposit being made today, what will your balance be at the end of Year 20?a. $52,821.19b. $57,900.83c. $58,988.19d. $62,527.47e. $64,131.50
Suppose you invest $200 a month for 6 years into an account earning 9% compounded monthly. After 6 years, you leave the money, without making additional deposits, in the account for another 20 years. How much will you have in the end? $ Suppose instead you didn't invest anything for the first 6 years, then deposited $200 a month for 20 years into an account earning 9% compounded monthly. How much will you have in the end?
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Suppose that $1,000 is invested at 4% interest compounded continuously. Use the formula A = Pert. (a) How long (to the nearest day) before the value is $1,250? years, days (b) How long (to the nearest day) before the money doubles? years, days (c) What is the interest rate (compounded continuously and rounded to the nearest tenth of a percent) if the money doubles in 5 years? %