Question 1 Michelle Smith is planning on taking her family to Disney World in three (3) years’time. She plans on saving $20,000 each month for the next three (3) years. How muchmoney will she accumulate at the end of that period if interest is 12% per annum? Angela is planning for her daughter’s university education in seven (7) years’ time. She estimated that the university education will cost $1,955,000. How much should sheinvest each year for the next seven (7) years to achieve this goal if interest rate is 15%? Mr. James would like an income of $300,000 per year in equal instalments for fifteen(15) years. How much should he invest in order to obtain this income if the interest rateis 20% compounded annually? You expect to deposit the following cash flows at the end of years one (1) through to five (5), $1, 000, $4, 000, $9, 000, $5, 000 and $2, 000 respectively. What is the future value at the end of year six (6) if you can earn 10% compounded annually? Question 2A $20,000 loan obtained today is to be repaid in equal instalments over the next six years, starting at the end of this year. If the annual interest rate is 10%, compounded annually, how much is the payment for each year? Patricia Graham is planning on going to the university. To finance her education, herbank has agreed to lend her $125,000 on the first day of each year for the next three years beginning January 1, 2011. The annual interest rate of 10% is compounded yearly. Patricia plans to graduate on December 31, 2013. What will be the amount owing to the bank on that date? A credit card company has interest rate of 10% per annum. If interest is compoundedquarterly, Calculate: the periodic ratethe EAR Suppose that you have $1,000,000 available for investment for a period of four years.After investigating the local banks, you have compiled the following table for comparison. Bank Interest Rate CompoundingScotia Bank 10% AnnuallyNational Commercial Bank 9% Semi-annuallyFirst Caribbean International Bank 6.8% Quarterly Using the Future Value concept (based on calculation), in which bank should youdeposit your funds to maximize return and why?

Question

Question 1 Michelle Smith is planning on taking her family to Disney World in three (3) years’time. She plans on saving $20,000 each month for the next three (3) years. How muchmoney will she accumulate at the end of that period if interest is 12% per annum? Angela is planning for her daughter’s university education in seven (7) years’ time. She estimated that the university education will cost $1,955,000. How much should sheinvest each year for the next seven (7) years to achieve this goal if interest rate is 15%? Mr. James would like an income of $300,000 per year in equal instalments for fifteen(15) years. How much should he invest in order to obtain this income if the interest rateis 20% compounded annually? You expect to deposit the following cash flows at the end of years one (1) through to five (5), $1, 000, $4, 000, $9, 000, $5, 000 and $2, 000 respectively. What is the future value at the end of year six (6) if you can earn 10% compounded annually?   Question 2A $20,000 loan obtained today is to be repaid in equal instalments over the next six years, starting at the end of this year. If the annual interest rate is 10%, compounded annually, how much is the payment for each year? Patricia Graham is planning on going to the university. To finance her education, herbank has agreed to lend her $125,000 on the first day of each year for the next three years beginning January 1, 2011. The annual interest rate of 10% is compounded yearly. Patricia plans to graduate on December 31, 2013. What will be the amount owing to the bank on that date? A credit card company has interest rate of 10% per annum. If interest is compoundedquarterly, Calculate: the periodic ratethe EAR Suppose that you have $1,000,000 available for investment for a period of four years.After investigating the local banks, you have compiled the following table for comparison. Bank                                                 Interest Rate                        CompoundingScotia Bank                                           10%                                       AnnuallyNational Commercial Bank                     9%                                       Semi-annuallyFirst Caribbean International Bank         6.8%                                    Quarterly Using the Future Value concept (based on calculation), in which bank should youdeposit your funds to maximize return and why?

Accepted Answer

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helle Smith is planning on taking her family to Disney World in three (3) years’ time. She plans on saving $20,000 each month for the next three (3) years. How much money will she accumulate at the end of that period if interest is 12% per annum?