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Instructions: 1. The Assessment Must Be Submitted Before The Workshop. 2. Late Submission Will Result in A Reduction in The Final Mark

The document contains instructions for a workshop assessment and 3 questions regarding compound interest calculations. Question 1 asks to calculate the amounts from an initial $10,000 investment in banks with different compounding periods and interest rates. Question 2 involves calculations of interest earned over 3 year periods from an initial $2,000 investment compounded annually at 8%. Question 3 contains parts asking to calculate present and future values over 6 years with a 10% rate.

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40 views1 page

Instructions: 1. The Assessment Must Be Submitted Before The Workshop. 2. Late Submission Will Result in A Reduction in The Final Mark

The document contains instructions for a workshop assessment and 3 questions regarding compound interest calculations. Question 1 asks to calculate the amounts from an initial $10,000 investment in banks with different compounding periods and interest rates. Question 2 involves calculations of interest earned over 3 year periods from an initial $2,000 investment compounded annually at 8%. Question 3 contains parts asking to calculate present and future values over 6 years with a 10% rate.

Uploaded by

asma raees
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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Instructions:

1. The assessment must be submitted before the workshop.

2. Late submission will result in a reduction in the final mark.


Question 1:

Fatima has $10,000 that she will invest in 3-year savings accounts. Bank A compounds annual interest,
bank B compounds interest twice a year, and bank C compounds interest each quarter. All three banks
have 6% specified annual interest rate.

a. What amount would Ms. Fatima have at the end of the third year, leaving all interest paid on deposit,
in each bank?

b. What effective annual rate (EAR) would she earn in each of the banks?

c. based on your findings in parts a and b, which bank should Ms. Fatima deal with? Why?

Question 2:

You have $2000 to invest today at 8% interest compounded annually.

a. Find how much you will have accumulated in the account at the end of (1) 3 years, (2) 6 years, and (3)
9 years.

b. Use your findings in part a to calculate the amount of interest earned in (1) the first 3 years (years 1
to 3), (2) the second 3 years (years 4 to 6), and (3) the third 3 years (years 7 to 9).

c. Compare and contrast your findings in part b. Explain why the amount of interest earned increases in
each subsequent 3-year period.

Question 3:

Answer each of the following questions.

a. What single investment made today, earning 10% annual interest, will be worth $6,000 at the end of 6
years?

b. What is the present value of $6,000 to be received at the end of 6 years if the discount rate is 10%?

c. What is the most you would pay today for a promise to repay you $6,000 at the end of 6 years if your
opportunity cost is 10%?

d. Compare, contrast, and discuss your findings in parts a through c.

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