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- From: Finance,
- Posted on: Wed 18 Sep, 2013
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1. Determine the amount on money in an investment account at the end of five years given a single initial deposit of $2,000 and a four percent annual interest rate when interest is compounded: a. Annually b. Semi-annually c. Monthly d. Continuously Calculate the Effective Annual Rate for a. through d. From your analysis, comment on the effect on future value and EAR of compounding frequency. 2. Your grandfather passed away on January 1, 2012. As you work with the executor to settle his estate you discover that he had been depositing $3,000 in his savings account at the end of each December for 25 years. His account had a guaranteed five percent return and the return was compounded quarterly. How much was in your grandfather’s account at the end of December 2011? Assume that he made the final deposit to the account in December 2011. Also assume that he made no withdrawals from the account. 3. You left MSVU in May 2005 without completing your degree. Your mother believed you would eventually return to school so she deposited the following amounts in a bank account for you: January 1, 2006 $2,000 January 1, 2007 $4,000 January 1, 2008 $3,000 January 1, 2009 $1,000 January 1, 2010 $5,000 January 1, 2011 $3,000 The bank account has a guaranteed annual return of 7 percent compounded annually. It is now January 1, 2012 and you are going back to school to finish your degree. How much money do you have in the account to return to school?

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