# finance 2841492 2

1. Kevin makes an investment of \$ 10,000 in a bank for a period of 5 years.

The bank pays an annual interest rate of 6%.

How much will he receive at the end of the term if interest is compounded quarterly.

Round off your answer to the nearest dollar.

2. Irwin wants to save up an amount of \$150,000 for his son’s college education fees, coming up in 5 years.The bank pays an interest rate of 5%.

Find the amount that should be invested today, if the interest is compounded half-yearly.

Round off your answer to the nearest dollar.

3. Irwin wants to save up an amount of \$150,000 for his son’s college education fees, coming up in 5 years.The bank pays an interest rate of 5%.

Find the amount that should be invested today, if the interest is compounded quarterly.

Round off your answer to the nearest dollar.

4. Given a monthly rate of 0.5%, what is the Effective Annual Rate (EAR)?

Give your answer to 2 decimal places.

5. What is the present value of \$50,000 received every year, forever, if you estimate the perpetual discount rate to be 5%? Round off your answer to the nearest dollar.

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