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4. Exactly 6 months from today you deposit $1,200 . Then, exactly 10 months from today you deposit $1,100 . Your account earns annual interest of 8.8% compounded monthly.
There are no other deposits or withdrawals and finally, exactly 16 months from today, you withdraw the entire accumulation. How much total interest did the account earn?

a. $96 b. $116 c. $128 d. $105 e. $140

I got 142 here:

1200(1+ .088/12) to the 10th power= 1291

1100(1+ .088/12) to the 6th power= 1149

1291-1149=142


6. In exactly 10 months a bill of $13,700 is due. Today you deposit money such that if the account earns a target rate of return of 0.86% per month, the bill is perfectly financed.
Unfortunately, your account earns 30 basis points less than your target. When the bill is due, how much money do you lack?

a. $442 b. $589 c. $402 d. $487 e. $535

I got 403 on this one:

13700/(1.0086)to the 10th=12,575

12575(1.0056)to the 10th=13297

13700-13297=403

2007-03-08 07:22:39 · 1 answers · asked by bamagrad07 2 in Education & Reference Homework Help

1 answers

Number 4:
1200 (1 + 0.088/12)^10 = 1290.961525
1100 (1 + 0.088/12)^6 = 1149.296057

[1149,296057 + 1290,961525] - [1200 + 1100]
= 140,25

Number 6:
13700/(1,0086)^10 = 12575,66411
12575,66411 (1,0056)^10 = 13297,91571
13700 - 13297,9157 = 402,08429

Remeber; This is a precise science. Your rounding is crucial!
Doun`t leave out the decimals.

2007-03-08 07:55:01 · answer #1 · answered by K S 1 · 0 0

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