Made into savings account

Assignment Help Financial Management

Reference no: EM131337940

Please provided step by step instructions for how the probelm was solved.

An investment of $15000 is made into a savings account. The interest rate to be paid each year is uncertain; however, it is estimated that it is twice as likely to be 6% as it is to be 4%, and is equally like to be either 6% or 8%. Determine the probability distribution for the amount in the fund after 3 years, assuming the interest rate is not autocorrelated.

Reference no: EM131337940

Questions Cloud

How much money would have accrued when he turned : As a savings plan to ensure your child's college education, a couple decides to deposit $ 100 a month into a bank account that pays interest at a rate of 6% per year compounded monthly. If the savings plan started when the child was 6 years old, how ..

Period largely owing to the demand from abroad : What would have happened to the money supply in the United States in the 1990s if the Federal Reserve had adhered to a policy of targeting monetary base growth of 3 percent each year regardless of the demand for currency? Note that currency growth av..

What is the capital gains yield on this investment : One year ago, you bought a stock for $36.48 a share. You received a dividend of $1.62 per share last month and sold the stock today for $41.18 a share. What is the capital gains yield on this investment? In the following exercises determine the effec..

What is expected return on shares of the law firm : We Do Bankruptcies is a law firm that specializes in providing advice to firms in financial distress. It prospers in recessions when other firms are struggling. Consequently, its beta is negative, −.2. If the interest rate on Treasury bills is 4% and..

Made into savings account : An investment of $15000 is made into a savings account. The interest rate to be paid each year is uncertain; however, it is estimated that it is twice as likely to be 6% as it is to be 4%, and is equally like to be either 6% or 8%. Determine the prob..

Defined as market in which security prices reflect : An efficient capital market is best defined as a market in which security prices reflect which one of the following?

What is maximum price per share schultz should pay for arras : Schultz Industries is considering the purchase of Arras Manufacturing. Arras is currently a supplier for Schultz, and the acquisition would allow Schultz to better control its material supply. The current cash flow from assets for Arras is $6.9 milli..

How much is the debt worth today and what is its yield : Fethe Inc. is a custom manufacturer of guitars, mandolins, and other stringed instruments and is located near Knoxville, Tennessee. Fethe's current value of operations, which is also its value of debt plus equity, is estimated to be $5 million. Using..

What will be the firm after tax cost of debt on a bond : Carraway seed company is issuing a $1000 par value bond that pays 7% annual interset and matures in 15 years. Investors are willing to pay $850 for the bond. Flotaion costs will be 3% of market value. The company in in a 30% marginal tax bracket. Wha..

User Account

All Pages