What is the effective annual interest rate

Assignment Help Finance Basics
Reference no: EM132525405

Fifteen years ago, you deposited $12,500 into an investment fund. Five years ago, you added an additional $20,000 to that account. You earned 8%, compounded semi-annually, for the first ten years, and 6.5%, compounded annually, for the last five years.

Required:

a) What is the effective annual interest rate (EAR) you would get for your investment in the first 10 years?

b) How much money do you have in your account today?

c) If you wish to have $85,000 now, how much should you have invested 15 years ago?

An effective annual rate is the modified interest rate from the nominal rate that represents the equivalent rate if annual compound interests are computed.

Reference no: EM132525405

Questions Cloud

Who contributes to economy more in form of tax payment : Who contributes to the economy more in the form of tax payment, an individual with P1,000,000 time deposit or a businessman with P1,000,000 net income?
Standard normal distribution : These are the yearly returns for a mutual fund. . YearReturn 2013 15.00%
How much ending inventory would the company show : Gross profit on sales is 35%. How much ending inventory would the company show using the Gross Profit Method? Show your work
Prepare general journal entry to record the four transaction : Prepare general journal entries to record the four transactions above and to adjust the Allowance for Doubtful Debts account. Doubtful debts
What is the effective annual interest rate : What is the effective annual interest rate (EAR) you would get for your investment in the first 10 years?
Firm weighted average cost of capital-phillips equipment : The corporate tax rate is 38 percent. What is the firm's weighted average cost of capital?
Determine amount the company recorded for Cost of Goods sold : A company shows the following data in their accounting records for 2014. Determine the amount the company recorded for Cost of Goods Sold in 2014
What is the risk premium on the market : The Treasury bill rate is 7%, and the expected return on the market portfolio is 13%. According to the capital asset pricing model:
Identify what risks are involved in share investments : Imagine that, in addition to your Kiwisaver funds, you've managed to accumulate $20,000 which you want to invest now for your retirement in 35-years' time.

Reviews

Write a Review

Finance Basics Questions & Answers

  Financial reporting and analysis

Finance is about Gunns Ltd, a company in dealing with forestry products in Australia. The company has also been listed in Australian Stock Exchange. As many companies producing forestry products, even Gunns Ltd is facing various problems. Due to the ..

  A report on financial accounting

This report is specific for a core understanding for Financial Accounting and its relevant factors.

  Describe the types of financial ratios

Describe the types of financial ratios and other financial performance measures that are used during venture's successful life cycle.

  Differences between sole proprietorship and corporation

Briefly describe the major differences between a sole proprietorship and a corporation

  Prepare a cash budget statement

Calculate the expected value of the apartment in 20 years' time. What is the mortgage loan repayment at the beginning of each month

  What are the implied interest rates

What are the implied interest rates in Europe and the U.S.?

  State pricing theory and no-arbitrage pricing theory

State pricing theory and no-arbitrage pricing theory

  Small business administration

Identify the likely stage for each venture and describe the type of financing each venture is likely to be seeking and identify potential sources for that financing.

  Effect of financial leverage

The Effect of Financial Leverage and working capital management

  Evaluate the basis for the payment to the lender

Evaluate the basis for the payment to the lender and basis for the payment to the company-counterparty.

  Importance of opps, ipps, mpfs and dmepos

Research and discuss the differences and importance of : OPPS, IPPS, MPFS and DMEPOS.

  Time value of money

Time Value of Money project

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd