(3 points) Answer each of the following questions: a) Barry Moore has put away $

Question

(3 points) Answer each of the following questions:

a) Barry Moore has put away $200 at the end of each month for the past 25 years in an account compounding monthly at an 8% rate of return. To the nearest dollar, how much is in his account today?




b) Peter Parker needs $12,500 to attend law school in 6 years. He can save about $750 every 6 months in an account that compounds on a semi-annual basis. What rate of interest will Peter require to meet his goal?




c) How much does Bruce Banner have to put into an account today in a lump sum (he will make no other payments) paying 6.75% annually, if he requires $50,000 for the down payment on a house he wants to buy in four years?




3. (2 points) What is the internal rate of return for an investment with the following cash flows? Remember to net the flows of each year.

Cash Inflows Cash Outflows Net Flow
Initial Outlay $125,000
End Year 1 $ 72,125 $ 53,650
End Year 2 $ 77,950 $ 52,000
End Year 3 $184,000 $ 47,500

Explanation / Answer

a) for each month $200 implies for each year 12 *200 = $2400 so for 25 years it will be 25*2400 = $60,000 b)$750 for 6months $12,500 / $750 = 16.66 /2 =8.33yrs to get the same amount in 6yrs he should get an interest

Related Questions

Navigate

• Browse (All)
• Browse #
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.