s considering putting her money ($50) into a $100 paper U.S. savings bond. Assume the guaranteed rate of interest is 4 percent. How long will it take for the money to double (reach $100)? Use the Rule of 72 to find the answer.
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- John wants to borrow 75,800 from a bank payable in 3 years and 9 months. if the bank charges 9.5% interest in advance what size of loan would he apply for?On his son's fifth birthday, a man decides to deposit a certain amount which will be equivalent to 28,000 with today's purchasing power of the peso on his son's eighteenth birthday when he starts his college education. If the bank pays 5 1/2% interest compounded annually but the rate of inflation is 8.7% compounded annually, how much should the man deposit now?Sean expects to receive $300,000 in 5 years from a trust fund. If a bank loans money at an interest rate of 8.2%, how much money can he borrow from the bank on the basis of this information?
- Suppose you think if you were to retire right now you would have needed $50,000 each year to supplement your social security and maintain your desired lifestyle. But because there is on average 3% annual inflation, when you retire in 30 years from now you need more than $50,000 per year to maintain the lifestyle you like. How much will be equivalent to $50,000 at the retirement time when adjusted for inflation? How much will be the face value of the bond that yields the equivalent of $50,000, found in #4 of Part B in coupon payment? How much annual payment in the retirement account is needed to accumulate the amount needed to purchase the bond when retiring? What is the purchase power of the amount that will be received by your inheritors, measured in the current value of $ at the time of opening the retirement account?Will Stephanie have enough funds for her investment in stocks and bonds, when needed? What will be the surplus / shortfall, if any? Given that Stephanie’s bank offers an interest rate of 6% per year, what additional amount should she have deposited as a fixed deposit in the bank so as to accumulate the amount needed for her investment in stocks and bonds when needed? 3. Suppose Stephanie deposited the $50,000 in a fixed deposit. For the shortfall, she thought of purchasing a 5-year ordinary annuity that pays an interest rate of 3.5% per annum, what annual deposit will be required to cover the shortfall? 4. Which of the two options would you recommend for covering the shortfall (Choose between the options in questions 8 and 9 above). Support your response with suitable computation.A child’s grandparents are considering buying a $80,000 face-value, zero-coupon bond at birth so that she will have money for her college education 17 years later. If they want a rate of return of 6% compounded annually, what should they pay for the bond?
- Maria wants to know the interest rate of her credit card starting today for 4 years? What is the effective interest rate if the present worth factor is 0.6875?Fatema wants to choose a better option for making an investment, help him to decide which is the better option by calculating the time value of money for the following: ich pays 6.75% interest for 15 years. a) An investment of OMR. 40000 in a Bond b) A Bank deposit of OMR 40000 which pays 6.75% interest for 15 years but compounding is done quarterly. c) Which of the two options should Abdullah accept? WhyA woman desires to have $400,000 in a savings account when she retires in 20 years. Because of the effects of inflation on spending power, she stipulates that her future “nest egg” will be equivalent to $400,000 in today’s purchasing power. If the expected average inflation rate is 7% per year and the savings account earns 5% per year, what lump-sum amount of money should the woman deposit now in her savings account?
- A grandfather is planning to leave his only granddaughter well off when she reaches the age of 25. He plans to deposit a lump sum now, which is her second birthday, such that she will have enough money to live comfortably without working. He wants her to have an amount that would have the same purchasing power as $2 million today. If he can invest the money now and earn an average market interest rate of 8% per year while the inflation rate averages 4% per year, what amount must he deposit?Salama wants to buy a car worth OMR. 10000, for which she has been saving and investing in bond an amount of OMR. 1100 each year for the last 10 years. She is willing to withdraw and buy a new car today, but does not know the exact amount of money she will get it. a) What amount will she receive assuming an interest rate of 7.75%? b) What amount will she receive assuming an interest rate of 8%? C) Suggest which option will help her in a better way to buy the Car worth OMR. 10000Your grandparents are asking you for advice on when they should start collecting social security payments. If they wait until age 66, they will collect $2000 per month; but if they start collecting at age 62, they will collect $1500 per month. Assume they live to be 85, and simplify by assuming annual payments. (a) When do the higher payments catch up in total dollars received with the lower payment that starts earlier? (b) If their interest rate is 6%, which plan has a higher PW?