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IBF Assignment 2

The document contains questions about compound interest calculations for various scenarios: 1) Calculating the balance of an initial $1000 deposit into an 8% interest savings account over 3 years with annual and quarterly compounding. 2) Calculating the future and present values of an initial $500 amount over 1-2 years at 6% interest compounded annually, semi-annually, quarterly, and monthly. It also contains optional bonus questions.

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Masfah Riaz
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72 views2 pages

IBF Assignment 2

The document contains questions about compound interest calculations for various scenarios: 1) Calculating the balance of an initial $1000 deposit into an 8% interest savings account over 3 years with annual and quarterly compounding. 2) Calculating the future and present values of an initial $500 amount over 1-2 years at 6% interest compounded annually, semi-annually, quarterly, and monthly. It also contains optional bonus questions.

Uploaded by

Masfah Riaz
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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IBF Assignment 2

Q1. It is now January 1, 2009. Today you will deposit $1,000 into a savings account that
pays 8%.
a. If the bank compounds interest annually, how much will you have in your account on
January 1, 2012?
b. What will your January 1, 2012, balance be if the bank uses quarterly compounding?
c. Suppose you deposit $1,000 in three payments of $333.333 each on January 1 of
2010, 2011, and 2012. How much will you have in your account on January 1, 2012,
based on 8% annual compounding?
d. How much will be in your account if the three payments begin on January 1, 2009?
e. Suppose you deposit three equal payments into your account on January 1 of 2010,
2011, and 2012. Assuming an 8% interest rate, how large must your payments be to
have the same ending balance as in Part a?

Q2. Find the following values using the equations. Compounding/discounting occurs
annually.
a. An initial $500 compounded for 1 year at 6%
b. An initial $500 compounded for 2 years at 6%
c. The present value of $500 due in 1 year at a discount rate of 6%
d. The present value of $500 due in 2 years at a discount rate of 6%

Repeat with semi-annual, quarterly, and monthly compounding.

The following questions are bonus questions and are optional. Successful
completion will result in bonus marks but not attempting them or
unsuccessful attempt will not result in any penalty or deduction.

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