1. Find the present value of $50,000 due in 6 years at the given rate of interes

Question

1. Find the present value of $50,000 due in 6 years at the given rate of interest. (Round your answers to the nearest cent.)

(a) 8%/year compounded monthly

(b)     9%/year compounded daily

2. Jada deposited an amount of money in a bank 7 years ago. If the bank had been paying interest at the rate of 4%/year compounded daily (assume a 365-day year) and she has $18,000 on deposit today, what was her initial deposit? (Round your answer to the nearest cent.)

3. Find the interest rate needed for an investment of $9,000 to grow to an amount of $13,500 in 3 years if interest is compounded monthly. (Round your answer to the nearest hundredth of a percentage point.)

4. How long will it take for an investment of $3,000 to triple if the investment earns interest at the rate of 5%/year compounded daily? (Round your answer to one decimal place.) answer in yrs

Explanation / Answer

Present value = A/(1 + r/n)nt

A = given amount , r = interest rate , n = number of compounding periods , t = time

a) A = 50000 , r = 8% , n = 12 (since 12 months in a year)

==> Present value = 50000/(1 + 0.08/12)(12)(6)

==> Present value = 50000/(1.0067)72

==> Present value = $ 30,988.49

b) A = 50000 , r = 9% , n = 365 (since 365 days in a year)

==> Present value = 50000/(1 + 0.09/365)(365)(6)

==> Present value = $ 29,139.35

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