Calculate the accumulation at the end of 20 years of an investment of £550 made at time t = 0, if the following apply: (ii) (i) 8% per annum nominal interest rate convertible monthly for the first 15 years, and thereafter 7% per annum effective discount rate. nominal interest rates of 6% per annum convertible three times per year for 8 years, and thereafter 6% per annum convertible every three years. (iii) 9.5% per annum force of interest for the first 10 years, and thereafter a compound interest rate at which a sum of money would increase fourfold in 20 years.

Calculate the accumulation at the end of 20 years of an investment of £550 made at time t = 0, if the following apply: (ii) (i) 8% per annum nominal interest rate convertible monthly for the first 15 years, and thereafter 7% per annum effective discount rate. nominal interest rates of 6% per annum convertible three times per year for 8 years, and thereafter 6% per annum convertible every three years. (iii) 9.5% per annum force of interest for the first 10 years, and thereafter a compound interest rate at which a sum of money would increase fourfold in 20 years.

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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Calculate the amount to which £18,600 will have accumulated after 16 years given an effective rate of interest of 6.1% per annum for the first 9 years and a nominal rate of discount of 8.3% per annum convertible monthly thereafter for the remaining years. Answer: Check
a)Find the nominal rate per annum convertible monthly that pays an interest of £200 on an initial capital of £1,000 at the end of 3 years. b)The annual effective interest rate is 5%. Find the monthly effective discount rate. c)Explain time-consistency of compound interest.
Find the present value and the accumulation at the end of 10 years of a series of payments that are made up by: £200 annually in arrears during the first 3 years, £35 monthly in arrears thereafter, given that the following interest rates apply: 9% per annum effective for the first 5 years, 6% per annum nominal convertible monthly thereafter.
(a) A loan of £36,000 is to be repaid with 12 equal quarterly instalments. The nom- inal rate of interest per annum convertible 12-thly is 4%. Find the amount of each quarterly repayment, assuming that payments are made (i) at the end of each quarter, (ii) at the beginning of each quarter.
8) Suppose an investment of $5.750.00 paying 6.5% nominal rate compounded semi-annually has a term of 5 years. Find the compound interest.
(a) Find the nominal rate per annum convertible quarterly that makes an interest payment of £150 on an initial capital of £1,000, at the end of 2 years. (b) Find the annual effective rate of discount equivalent to a nominal interest rate of 2% p.a. convertible semi-annually.
An investment is expected to make future returns at a rate of £1,800 per annum over the next 10- year period. Assuming a nominal discount rate of 5% per annum convertible quarterly, find the present value of the stream of future incomes if the payments are received: (i) quarterly in advance; (ii) annually in arrears; (iii) at the end of every 2 years.
(a) (b) (c) Find the nominal rate per annum convertible monthly that pays an interest of £200 on an initial capital of £1,000 at the end of 3 years. The annual effective interest rate is 5%. Find the monthly effective discount rate. Explain time-consistency of compound interest.
A loan of £5,000 is to be repaid by level monthly instalments in arrear over a period of five years,the flat rate of interest for this transaction being 4.7% per annum. APR of the transaction is Select one: a. 7.13% b. 9.54% C. 6.45% d. 5.16% e. 8.9%
5) Determine the present value at time 0 of payments of $1,000 at the start of each month for 5 years, starting at time 0. The nominal interest rate convertible quarterly is 4%.
An investment will provide a regular quarterly income after a deferred period of 5-years, starting with £2400 at the end of the first quarter and then consecutive payments decreasing by £50 at the end of each quarter over a 5-year term. Find the present value of this investment assuming a nominal rate of interest of 6.56% per annum convertible quarterly throughout the entire period. Hint: The first payment is payable in exactly 5 years and 3 months' time from now.
If an initial investment of $1,000 is invested at 8% interest per year with semi-annual compounding, how much would be in the account after five years? A. $1,081.60 B. $1,061.66 C. $1,051.00 D. $1,281.60 The difference between the present and future worth of money at some time in the future is called A. Discount B. Deduction C. Inflation D. Depletion

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