Author Question: You deposit $100 in a bank for a fixed 7 year term. Interest on the deposit is calculated every ... (Read 87 times)

lindiwe · **on:** Apr 25, 2021

Question 1

What is the future value of the following cash flows in year 5 with an interest rate of 6%?

Year	Cash Flow
1	$200
2	$400
3	$600
4	$800
5	$1000

◦ $3,251.06
◦ $3,446.13
◦ $3,067.04
◦ $3,000.00
◦ $3,180.00

Question 2

You deposit $100 in a bank for a fixed 7 year term. Interest on the deposit is calculated every half-year (m = 2) at the rate of 5% per half-year (i/m = 5%). Because the term is fixed, you are not allowed to withdraw interest at any point. You earn interest in the final compounding period of the term. How much of that interest is earned off of earlier interest (as opposed to earned off of the principal)?
◦ $4.43
◦ $9.43
◦ $4.90
◦ $5.00
◦ $9.90

Benayers · **Reply #1 on:** Apr 25, 2021

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