An engineering graduate starts a new job at $60,000 per year. Her investments are depostied at the end of the year into a mutual fund that earns a nominal interest rate of 3.9608 % per year with semiannual compounding. How much money will be in the account immediately after she makes the last deposit if: 1. She makes $6800 annual deposits for the next 40 years; 2. She makes the $6800 deposits for the next 10 years, then stops all investments for the next 10 years, and then resumes deposits of $10800 per year for the next 20 years. Solution: The nominal rate is given as APR = The number of compounding periods per year is m The annual effective interest rate la = 1. She makes $6800 annual deposits for the next 40 years; - This is a single uniform series, so F = $ 2. She makes the $6800 deposits for the next 10 years, then stops all investments for the next 10 years, and then resumes deposits of $10800 per year for the next 20 years. -This option has two separate parts: *Uniform series for the first 10 years, has an equivalent future worth at year 40 as F1 = $ *Uniform series for the last 20 years, has an equivalent future worth at year 40 as F2 = $ Thus the total future amount is F = $ %; (keep 2 decimals only)

An engineering graduate starts a new job at $60,000 per year. Her investments are depostied at the end of the year into a mutual fund that earns a nominal interest rate of 3.9608 % per year with semiannual compounding. How much money will be in the account immediately after she makes the last deposit if: 1. She makes $6800 annual deposits for the next 40 years; 2. She makes the $6800 deposits for the next 10 years, then stops all investments for the next 10 years, and then resumes deposits of $10800 per year for the next 20 years. Solution: The nominal rate is given as APR = The number of compounding periods per year is m The annual effective interest rate la = 1. She makes $6800 annual deposits for the next 40 years; - This is a single uniform series, so F = $ 2. She makes the $6800 deposits for the next 10 years, then stops all investments for the next 10 years, and then resumes deposits of $10800 per year for the next 20 years. -This option has two separate parts: Uniform series for the first 10 years, has an equivalent future worth at year 40 as F1 = $ Uniform series for the last 20 years, has an equivalent future worth at year 40 as F2 = $ Thus the total future amount is F = $ %; (keep 2 decimals only)

Corporate Fin Focused Approach

5th Edition

ISBN:9781285660516

Author:EHRHARDT

Publisher:EHRHARDT

Chapter4: Time Value Of Money

Section: Chapter Questions

Problem 28P

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