2019-01-25T09:44:22+00:00
Juan and Rachel Burpo plan to buy a time-share in six years of $16,860. In order to have adequate funds to do so, the Burpo want to make a deposit to their money market fund today. Assume that they will be able to earn an investment rate of 5.75%, compoun
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Economics Computation
Question: Juan and Rachel Burpo plan to buy a time-share in six years of $16,860. In order to have adequate funds to do so, the Burpo want to make a deposit to their money market fund today. Assume that they will be able to earn an investment rate of 5.75%, compounded annually. How much will Juan and Rachel need to deposit today to achieve their goal? (Round off to the nearest dollar.)
How do you compute the compounded annually?
Sample Ans
FV=16,860
n=6
r=5.75%
PV= 16,860/1.0575^6
PV=$12,055
Question How much will $100 grow to if invested at a continuously compounded interest rate of 10.75% for 8 years?
Sample ans
The Time Value of Money
FVN=PVersN
The term e r s N
is the transcendental number e ≈ 2.7182818 raised to the power rs N. Most financial calculators have the function ex .
(Institute 287)
Institute, CFA. 2016 CFA Level I Volume 1 Ethical and Professional Standards and Quantitative Methods. CFA Institute, 07/2015. VitalBook file.
The citation provided is a guideline. Please check each citation for accuracy before use.
answer= 100e(.1075*8)=100e0.86=$236.3160694
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