Answered

11) Ms. Whodunit needs $15 000 to go on her dream vacation in four years. How much does she need to invest now in an account earning 5.5% annual interest
compounded semi-annually? [3]

12) After learning about finances in grade 11, you decide to put money and at the end
of every month invest $150 into the stock market for the next 48 years (until you
retire). Assuming the market returns 7% per annum, compounded monthly, how
much will you have after 48 years?

11) Ms. Whodunit needs $15 000 to go on her dream vacation in four years. How much does she need to invest now in an account earning 5.5% annual interest compou class=

Answer :

The amount Ms. Whodunit needs for her dream vacation is $12,073.60; while the amount you will have after 48 years is $707,387.57.

How do we calculate the present value?

11) The amount Ms. Whodunit needs for her dream vacation can be calculated using the formula for calculating the present value as follows:

PV = FV / (1 + r)^n ……………………………………………. (1)

PV = Present value or the amount she needs to invest now = ?

FV = Future value = $15,000

r = Semiannual interest rate = 5.5% / 2 = 0.0275

n = number of semi-annuals = 4 * 2 = 8

Substituting the values into equation (1), we have:

PV = $15,000 / (1 + 0.0275)^8 = $12,073.60

12) The amount you will have after 48 years can be calculated using the formula for calculating the Future Value (FV) of an Ordinary Annuity as follows:

FV = M * (((1 + r)^n - 1) / r) ................................. (2)

Where,

FV = Future value of the amount after 48 years =?

M = Monthly payment = $150

r = Monthly interest rate = 7% / 2 = 0.07 / 12 = 0.00583333333333333

n = number of months = 48 * 12 = 576

Substituting the values into equation (2), we have:

FV = $150 * (((1 + 0.00583333333333333)^576 - 1) / 0.00583333333333333)

FV = $707,387.57

Learn more about present value here: https://brainly.com/question/14860893.

#SPJ1

Other Questions