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Brut [27]
3 years ago
5

Suppose your bank account pays interest monthly with an effective annual rate of 6%. What amount of interest will you earn each m

onth? If you have no money in the bank today, how much will you need to save at the end of each month to accumulate $100,000 in 10 years?
Business
2 answers:
Anna [14]3 years ago
5 0

Answer:

The monthly interest rate is 0.5%

The monthly savings must be $610.21

Explanation:

Firstly we are given an effective annual rate of 6% therefore to find the effective monthly rate we will divide this interest rate by 12 months as a year has 12 months, the monthly rate is 6%/12= 0.5%.

To now calculate the the monthly savings we will use the future value annuity as this is the monthly deposits that will accumulate an interest in 10 years to be a future amount of $100000, so to simplify the given information :

$100000 is the future value of the monthly savings Fv

0.5% is the monthly interest rate i

10 years  x 12 months = 120 payments is the number of saving deposits in 10 years.

now we will substitute the above information to the following future value formula:

Fv = C[((1+i)^n -1)/i]

C is the monthly savings deposits that will be accumulated during the 10 year course in which we will calculate.

$100000 = C[(1+0.5%)^120 -1)/0.5%] after substituting we solve for C

$100000/[(1+0.5%)^120 -1)/0.5%] = C

$610.2050194 = C now we round off to two decimal places.

$610.21 = C is the monthly savings that will accumulate to $100000 in 10 years.

Bess [88]3 years ago
4 0

Answer:

0.4868%

$615.47

Explanation:

Given that

a. EAR = 6%

Thus,

Equivalent monthly rate = (1 + r)^n - 1

Where r = EAR

Therefore

= (1 + 0.06)^1/12 - 1

= 1.0048675 - 1

= 0.0048675 × 100

= 0.4868%

b. Given that

Monthly rate = 0.4868%

Future value = 100,000

Time = 10 years

Recall that

FV annuity formula = C × (1/r) × ([1 + r ]^n - 1)

Where

C = payment

Therefore

100000 = C (1/0.004868) × ([1 + 0.004868]^120 - 1)

C = 100,000/(1/0.004868) × ([1 + 0.004868]^120 - 1)

C = $615.47 per month

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Answer:

$58,002.60

Explanation:

First, it is clear to include the $21,000 as part of the value of the equipment.

Now, the $9,000 annual payment after every year for six years need to be presented in its present value, meaning what is the value of those future amounts of $9,000 on June 30, 2018.

To calculate the present value of annuity (annuity means constant and equal payments) for those 6 payments of $9,000, we would need the Present Value Factor which is supplied from the Present Value Table.

Looking at 12% for 6 periods ("six annual installments") on the table, it gives the PV factor of 4.1114.

Just multiply $9,000 by 4.1114 and we get 37,002.60

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5 0
3 years ago
A year​ ago, the Really Big Growth Fund was being quoted at an NAV of ​$22.28 and an offer price of ​$23.45. ​Today, it's being
Crank

Answer:

9.85%

Explanation:

Data provided in the question:

Initial Offer price = ​$23.45

Current NAV = ​$22.28

Dividends and capital gains distributions over the year  = $1.09 per​ share

Now,

Holding period return

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= [ $24.67 + $1.09 - $23.45 ] ÷ $23.45

= $2.31 ÷ $23.45

= 0.0985

or

= 0.0985 × 100%

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4 0
3 years ago
A partnership intentionally created and recognized, orally or in writing is known as a(n) _____ partnership.
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Andre works for a company that promotes an entrepreneurial culture. Employees are encouraged to discuss new ideas. Development t
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Answer:

Intrapreneurs

Explanation:

An intrapreneur is an employee who is responsible for creating new products in an organization. An intrapreneur is an individual who converts an idea into a finished product. An intrapreneur must possess the ability to create something unique, they must be self motivated individuals who are willing to take calculated risks inorder to achieve their goals.

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6 0
3 years ago
A dividend preference for preferred stock means that:_________A. Dividends must be declared on preferred stock. B. Preferred sha
Airida [17]

Answer:

D. Preferred stockholders are allocated their dividends before dividends are allocated to common shareholders.

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