User Account

All Pages

Bank compounds interest annually

Assignment Help Financial Management
Reference no: EM131354465

Assume that it is now january 1, 1997. On january 1, 1998, you will deposit $1,000 in to a savings account that pays 8 percent.

a) If the bank compounds interest annually, how much will you have in your account on january 1, 2001?

b) What would your january 1, 2001, balance be if the bank used quarterly compounding rather than annual compounding?

c) Suppose you deposited the $1,000 in 4 payments of $250 each on january 1rst of 1998, 1999, 2000, and 2001. How much would you have in your account on january 1, 2001, based on 8% annual compounding?

d) Suppose you deposited 4 equal payments in your account on january 1rst of 1998, 1999, 2000, and 2001. assuming an 8 percent interest rate, how large would each of your payments have to be for you to obtain the same ending balance as you calculated in part a)?

Reference no: EM131354465

Questions Cloud

Calculate the price of two-year call option : The current price of Natasha Corporation stock is $6. In each of the next two years, this stock price can either go up by $2.50 or go down by $2. The stock pays no dividends. The one-year risk-free interest rate is 3% and will remain constant. Using ..
Calculate the price of a two-year european put option : The current price of Natasha Corporation stock is $6. In each of the next two years, this stock price can either go up by $2.50 or go down by $2. Using the Binomial Model, calculate the price of a two-year call option on Natasha stock with a strike p..
Would you expect this to cause call price to rise or fall : A stock trades for $45 per share. A call option on that stock has a strike price of $50 and an expiration date one year in the future. The volatility of the stocks return is 30%, and the risk-free rate is 2%. What is the Black and Scholes value of th..
Bank compounds interest annually : Assume that it is now january 1, 1997. On january 1, 1998, you will deposit $1,000 in to a savings account that pays 8 percent. If the bank compounds interest annually, how much will you have in your account on january 1, 2001? What would your januar..
The bond yield to maturity at the end of the year : A bond that pays coupons annually is issued with a coupon rate of 4.1%, maturity of 25 years, and a yield to maturity of 7.1%. What rate of return will be earned by an investor who purchases the bond and holds it for 1 year if the bond’s yield to mat..
Company issued new securities in the same proportion : Pardon Me, Inc., recently issued new securities to finance a new TV show. The project cost $13.1 million, and the company paid $635,000 in flotation costs. If the company issued new securities in the same proportion as its target capital structure, w..
The market price of home depot stock rises : A six-month call option contract on 100 shares of Home Depot common stock with a strike price of $60 can be purchased for $600. Assuming that the market price of Home Depot stock rises to $75 per share by the expiration date of the option, what is th..
Project with the loan subsidy combined with equity : Blue Gills Corporation is looking to build a toll road in Iowa. The initial investment in paving equipment is $81 million. The equipment will be fully depreciated using the straight-line method over its economic life of ten years. What is the value o..

Reviews

Write a Review

Financial Management Questions & Answers

  Summer camp for kids with the average expenses

Pat Davis runs a summer camp for kids with the average expenses in each month as shown below. The camp uses a savings account for all funds that pays interest of 1.00% nominal annual rate with monthly compounding. Pat is getting older and wants to fu..

  What will be the net cash flow from the sale

The Wise Co. purchased a new truck two years ago for $56,000. The company uses MACRS depreciation for accounting purposes. The truck is classified as 5-year property, which has depreciation allowances of 20%, 32%, and 19.20% for the first three years..

  From a philosophical and theoretical point of view do you

contd from the question - as well as situations that involved public figures from various genres caught performing

  Dividends are expected to grow-stock price

A7X Corp. just paid a dividend of $1.30 per share. The dividends are expected to grow at 16 percent for the next eight years and then level off to a growth rate of 5 percent indefinitely. If the required return is 11 percent, what is the price of the..

  What is the firms net operating working capital

The assets of Dallas & Associates consist entirely of current assets and net plant and equipment. The firm has total assets of $2.6 million and net plant and equipment equals $2.1 million. It has notes payable of $140,000, long-term debt of $745,000,..

  What are the project annual cash flows in years

You must evaluate a proposed spectrometer for the R&D department. The base price is $260,000, and it would cost another $39,000 to modify the equipment for special use by the firm. The equipment falls into the MACRS 3-year class and would be sold aft..

  What was the firms operating cash flow and net income

During the year, the Senbet Discount Tire Company had gross sales of $1.2 million. The firm’s cost of goods sold and selling expenses were $539,000 and $229,000, respectively. The firm also had notes payable of $940,000. These notes carried an intere..

  Firms should follow a constant dividend payout ratio policy

Farrah owns 5,000 shares of stock in DAS, Inc. with a market value of $15,000.DAS declares a 20% stock dividend. After the dividend is paid, Farrah owns. In industries with volatile earnings, the residual dividend policy results in the most consisten..

  Writing a business plan to create financials

Writing a business plan to create financials as part of the business plan.  Section #1: Start-up expenses and capitalization.  Section#2: Financial Plan.

  Targeting investment toward longer term assets

Targeting investment toward longer term (nonliquid) assets and using shorter term financing results in

  Zero-coupon bond-what is expected return of the bond

Mr. Weiss just bought a zero-coupon bond issued by Risky Corp. for $870, with $1000 face value and one year to mature. He believes that the market will be in expansion with probability 0.9 and in recession with probability 0.1. In the event of expans..

  Major reasons for a manager to understand cost behavior

Which one of the following is not one of the major reasons for a manager to understand cost behavior?

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

Submit Assignment

Academics

Major Subjects

Majors

Get In Touch

whatsapp: +1-415-670-9521

Phone: +1-415-670-9521

Email: [email protected]

TERMS & POLICIES

HELP & SUPPORT

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd