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Determining the investment worth in 1 year

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Reference no: EM132804300

(1) Assume that you receive $1000 and decide to invest it at an 8% annual rate. How much will this investment be worth in 1 year?

(2) Assume that you receive $1000 and decide to invest it at an 8% annual rate How much will this investment be worth in 2 years?

(3) Now, assume that you wish to pay a friend $1000 1 year from today. Assuming that you can receive 8% on an investment, how much would you need to invest today so that you have $1000 to give the friend in 1 year?

(4) Now, assume that you wish to pay a friend $1000 1 year from today. Assuming that you can receive 8% on an investment, how much would you need to invest today so that you have $1000 to give the friend in 1 year?

(5) Now, assume that you wish to pay a friend $1000 2 years from today. Assuming that you can receive 8% on an investment, how much would you need to invest today so that you have $1000 to give the friend in 2 year?

(6) Now, assume that you wish to pay a friend $1000 at the end of each of the next 2 years. Assuming that you can receive 8% on an investment, how much would you need to invest today so that you have $1000 to give the friend at the end of each of the next 2 years?

(7) Assume that you receive $1000 and wish to invest it so that it will return an 8% annual rate. If the interest is allowed to compound twice a year (semi-annual compounding), how much will this investment be worth in 2 year?

(8) Assume that you receive $1000 and wish to invest it so that it will return an 8% annual rate. If the interest is allowed to compound four times a year (quarterly compounding), how much will this investment be worth in 2 year?

(9) Assume that you receive $1000 and wish to invest it so that it will return an 8% annual rate. If the interest is allowed to compound twelve times a year (monthly compounding), how much will this investment be worth in 2 year?

(10) Assume that you receive $1000 and wish to invest it so that it will return an 8% annual rate. If the interest is allowed to compound "every second" (continuous compounding), how much will this investment be worth in 2 year?

(11) Assume that you wish to invest $X at an 8% annual rate (APR). Now, assume the interest is allowed to compound "every second" (continuous compounding). What APR with annual compounding will generate the same return as the investment above (in other words, what is the "effective yield on 8% compounded continuously)? Execution this same calculation for Semi-annual, Quarterly and Monthly Compounding.

(12) Now, assume that you wish to pay a friend $1000 at the end of each of the next 2 years. Assuming that you can receive 8% APR on a one-year investment and 9% APR on a two-year investment. Assume compounding is done annually. How much would you need to invest todays so that you have $1000 to give the friend at the end of each of the next 2 years?

Reference no: EM132804300

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