You are considering saving $10,000 in a bank certificate of deposit. Stated interest rate is 9%....

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Finance

You are considering saving $10,000 in a bank certificate ofdeposit. Stated interest rate is 9%. Find:
1. The future value in 20 years with quarterly compounding.
2. What is effective rate with quarterly compounding?
3. You anticipate needing $30,000 for a down payment on a homein six years. If you earn 6%, how much must you set aside now toachieve this?
4. Referring to #3, how much would you have to set aside at theend of each year, instead of now, to achieve the $30,000objective?
5. You have begun a 401k at work, contributing $1,000 at the endof each year. How much is your account worth in forty years,assuming a 6% rate of interest?

Answer & Explanation Solved by verified expert

4.4 Ratings (614 Votes)

Time value of money refers to the concept inwhich it is dominantly stated that the present value of money whichis to be received in future will be low See Answer

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You are considering saving $10,000 in a bank certificate ofdeposit. Stated interest rate is 9%. Find:1. The future value in 20 years with quarterly compounding.2. What is effective rate with quarterly compounding?3. You anticipate needing $30,000 for a down payment on a homein six years. If you earn 6%, how much must you set aside now toachieve this?4. Referring to #3, how much would you have to set aside at theend of each year, instead of now, to achieve the $30,000objective?5. You have begun a 401k at work, contributing $1,000 at the endof each year. How much is your account worth in forty years,assuming a 6% rate of interest?