A principal of $20,000 is invested at 6% for 10 years. Determine its future value if the interest is compounded i. Semi-annually (10%) ii. Monthly (10%) iii. Continuously (10%)
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A principal of $20,000 is invested at 6% for 10 years.
Determine its
i. Semi-annually (10%)
ii. Monthly (10%)
iii. Continuously (10%)
iv. Explain, using your own words, the different results in (i), (ii), (iii).
Explain which one the consumer would prefer, and which one the bank would prefer.
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- Sarah Maddox wants to buy a new car that will cost $15,000. She will make a down payment in the amount of $3,000. She would like to borrow the remainder from a bank at an interest rate of 8% compounded monthly. She agrees to make monthly payments for a period of two years in order to pay off the loan.Select the correct answer for each of the following questions:(a) What is the amount of the monthly payment (A)?1. A = $12,000 (A/P, 0.75%, 24).2. A = $12,000 (A/F, 0.66%, 24).3. A = $12,000 (A/P, 0.66%, 24).4. A = $12,000 (A/F, 9%, 2)/12.(b) Sarah has made 12 payments and wants to figure out the remaining balance immediately after the 12th payment. What is that remaining balance?1. 812 = 12A.2. 812 = A(PIA, 9%, 1)/12.3. 812 = A(PIA, 0.66%, 12).4. 812 = 10,000-12A.Tom Evers an attorney is planning for retirement. He earns $126,000 a year and estimates that he will need 80% of his salary for retirement in 10 years. Tom invests him money in Citizen's Bank at 6% compounded quarterly. How much money would Tom have to put in the bank today to have enough for retirement?A bank is negotiating a loan. The loan can either be paid off as a lump sum of $100,000 at the end of four years, or as equal annual payments at the end of each of the next four years. If the interest rate on the loan is 10%, what annual payments should be made so that both forms of payment are equivalent?
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