What is the effective interest rate-annual percentage yield

Assignment Help Financial Management
Reference no: EM131883754

Suppose you have 15 years until you retire, and that you desire a retirement nest-egg of $2,500,000 on the day you retire. Suppose also that you’ve saved $100,000 toward your retirement so far, and that your investment account earns a nominal rate of 7.5% per year, compounded monthly. In addition, suppose you expect a windfall inheritance of $200,000 five years from now that you will invest in this account.

a) What is the effective interest rate, or annual percentage yield, of your investment account?

b) How much money should you deposit into that account every year in order to reach your goal?

Reference no: EM131883754

Questions Cloud

Uncertainty inherent in these types of investments : The Capital Investment Committee refused to approve your recommendation since you did not consider the uncertainty inherent in these types of investments
What is the equal-payment series : What is the equal –payment series for 10 years that is equivalent to a payment series starting with $5000 at end of first year and increasing by $500 each year
What is the selling price at the end of the holding period : What is the selling price at the end of the holding period? What is the future value of the reinvested coupons at the end of the holding period?
What is the sustainable growth rate for the company : What is the sustainable growth rate for the company? What growth rate could be supported with no outside financing at all?
What is the effective interest rate-annual percentage yield : What is the effective interest rate, or annual percentage yield, of your investment account?
Semiannually to interest rate compounded monthly : Convert a quoted interest of 10% compounded semiannually to an interest rate compounded monthly.
When one party has broken contract : When one party has broken a contract, there are remedies, which include:
What is the portfolio equilibrium expected return : According to APT, what is the portfolio's equilibrium expected return?
Welding supply-calculate the sustainable growth rate : You are given the following information on Kaleb's Welding Supply: Calculate the sustainable growth rate.

Reviews

Write a Review

Financial Management Questions & Answers

  Recommending controls

You will have the opportunity in this Discussion to recommend sound internal controls over sales invoices and receivables. If controls are not in place over these functions, companies are susceptible to errors, fraud, and losses. In the following sce..

  What is the standard deviation of the stock’s returns

You find a certain stock that had returns of 15.4 percent, –22.7 percent, 28.7 percent, and 19.7 percent for four of the last five years. Assume the average return of the stock over this period was 13.40 percent. Requirement 1: What was the stock’s r..

  Example of psychological and ethical egoism

How/why is Nietzsche’s concept of the “Will to Power” an example of Psychological and Ethical Egoism,

  The faculty do you believe the structure influences

What behaviors by the faculty do you believe the structure influences? Is it aligned? Difficult to copy? Does it add value?

  Describe the tax and nontax uses of transfer pricing

Be able to discuss how taxation affects cost of capital for multinational companies and how taxation can affect capital allocation decisions. Describe the tax and nontax uses of transfer pricing. Describe the general parameters of defensible transfer..

  Constant payment loan method

Calculate interest and principle for a $100,000 loan with the rate of 4% that has to be repaid over 6 years. using Constant Payment Loan method.

  Sunk costs and opportunity costs

How should the $ 1 comma 110 comma 000$1,110,000 in development costs be? classified? What are all the relevant cash flows for years 0 thru 1414??

  Assume that the company uses absorption-variable costing

Ida Sidha Karya Company is a family-owned company located in the village of Gianyar on the island of Bali in Indonesia. The company produces a handcrafted Balinese musical instrument called a gamelan that is similar to a xylophone. Assume that the co..

  How much would it have to pay at the maturity date

Assume that HOS could issue a zero coupon bond at an annual interest rate of 4 percent with semi annual compounding for 20 years. If HOS receives $2,264.45 for the bond, how much would it have to pay at the maturity date?

  What is realized return on vc funds overall portfolio

Of the remaining investments, three break even, earning a 0 percent return. One investment pays off spectacularly and earns a 650 percent return. What is the realized return on the VC fund's overall portfolio?

  Central bank strategy of achieving a certain value

_____ is a central bank strategy of achieving a certain value (target) of the annual growth rate of a monetary aggregate and _____ is, among several elements, an institutional commitment to price stability as the primary, long-term goal of monetary p..

  The weighted average cost of capital for company

The weighted average cost of capital for a company:

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