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Assume that it is now January 1, 2020, and you will need $1,000 on January...

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Finance

Assume that it is now January 1, 2020, and you will need $1,000 on January 1, 2024. Your bank compounds interest at an eight percent annual rate.

  1. Suppose you can deposit only 186.29 each January 1 from 2021 through 2024, but you still need $1,000 on January 1, 2024. What interest rate, with annual compounding, must you seek out to achieve your goal?
  2. To help you reach your $1,000 goal, your father offers to give you $400 on January 1, 2021. You will get a part-time job and make six additional payments of equal amounts each six months thereafter. If all of this money is deposited in a bank that pays eight percent, compounded semiannually, how large must each of the six payments be?
  3. What is effective annual rate being paid by the band in part b?

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