Suppose you begin saving for your retirement by depositing $2,000 per year in an IRA....
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Suppose you begin saving for your retirement by depositing $2,000 per year in an IRA. If the interest rate is 7.5%, how much will you have in 40 years?
2000((1+0.075)^40-1)/0.075
=2000(1.075)^40-1/0.075
=2000(18.044239-1)/0.075
=2000(17.044239)/0.075
=34088.478/0.075
=$454,513.04
11. Calculate the following:
a. What is the APR if the monthly rate is 0.8%?
0.8%x12
=0.0960
=9.60%
b. What is the APR if the semiannual rate is 0.6%?
0.6%x2
=0.0120
=1.20%
c. What is the monthly rate if the APR is 17% with monthly compounding?
17 %/12
=0.0142
=1.42%
12. Suppose the following:
a. Suppose you can earn 1% per month on $1 invested today. How much are you effectively earning?
b. Suppose if you put it in another account, you earn 3% per quarter. What is the APR? Effective Rate?
Suppose you begin saving for your retirement by depositing $2,000 per year in an IRA. If the interest rate is 7.5%, how much will you have in 40 years?
2000((1+0.075)^40-1)/0.075
=2000(1.075)^40-1/0.075
=2000(18.044239-1)/0.075
=2000(17.044239)/0.075
=34088.478/0.075
=$454,513.04
11. Calculate the following:
a. What is the APR if the monthly rate is 0.8%?
0.8%x12
=0.0960
=9.60%
b. What is the APR if the semiannual rate is 0.6%?
0.6%x2
=0.0120
=1.20%
c. What is the monthly rate if the APR is 17% with monthly compounding?
17 %/12
=0.0142
=1.42%
12. Suppose the following:
a. Suppose you can earn 1% per month on $1 invested today. How much are you effectively earning?
b. Suppose if you put it in another account, you earn 3% per quarter. What is the APR? Effective Rate?
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