Jimmy wants to buy a taxi 6 years later. He will need $550,000 as the down payment. He initially deposits $150,000 in a savings account and plans to make further deposits of $250,000 at the end of second year, and $110,000 at the end of the fifth year. The annual nominal rate of interest is 6% compounded quarterly. (a) What is the annual effective rate of interest? (b) Would she have enough money to pay the down payment after 6 years? with calculation. Explain your answer (c) How much is the total interest gain within 6 years?
Jimmy wants to buy a taxi 6 years later. He will need $550,000 as the down payment. He initially deposits $150,000 in a savings account and plans to make further deposits of $250,000 at the end of second year, and $110,000 at the end of the fifth year. The annual nominal rate of interest is 6% compounded quarterly. (a) What is the annual effective rate of interest? (b) Would she have enough money to pay the down payment after 6 years? with calculation. Explain your answer (c) How much is the total interest gain within 6 years?
Chapter4: Time Value Of Money
Section: Chapter Questions
Problem 16PROB
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Jimmy wants to buy a taxi 6 years later. He will need $550,000 as the down payment. He
initially deposits $150,000 in a savings account and plans to make further deposits of $250,000
at the end of second year, and $110,000 at the end of the fifth year. The annual nominal rate of
interest is 6% compounded quarterly.
(a) What is the annual effective rate of interest?
(b) Would she have enough money to pay the down payment after 6 years? with calculation. Explain your answer
(c) How much is the total interest gain within 6 years?
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