(Answered) You plan to invest 2000 in an individual retirement

Finance

You plan to invest $2,000 in an individual
retirement arrangement (IRA) today at a nominal annual rate of 8%, which is expected to apply to all future years.
a. How much will you have in the account at the end of 10 years if interest is compounded
(1) annually, (2) semiannually, (3) daily (assume a 365-day year), and
(4) continuously?
b. What is the effective annual rate (EAR) for each compounding period in part a?
c. How much greater will your IRA balance be at the end of 10 years if interest is compounded continuously rather than annually?
d. How does the compounding frequency affect the future value and effective annual rate for a given deposit? Explain in terms of your findings in parts a through c.

View complete question

Basic Finance, Finance

Category:- Basic Finance
Reference No.:- M91188746
Price:- $30

Verified Expert

Priced at $60 Now at $30, Verified Solution

Have any Question?Write your Review or question?

Related Questions in Basic Finance

Questions -q1 firm a is issuing a zero-coupon bond that

Questions - Q1: Firm A is issuing a zero-coupon bond that will have a maturity of 50 years. The bond's par value is $1,000, and the current interest rate is 7.5%. What is the price of this bond? Q2: What is the price of ...

The data in this problem is hypothetical it is march now a

The data in this problem is hypothetical. It is March now. A September futures contract on 10,000 MMBtu of natural gas settled for $2.95 per MMBtu. Assume that the contract has exactly 6 months to maturity. Present valu ...

Question - find an australian house or apartment that you

Question - Find an Australian house or apartment that you would like to research. From here on this will be referred to as a house or property or home regardless of whether it is a house or apartment. The house can be an ...

Question - a particular securitys equilibrium rate of

Question - A particular security's equilibrium rate of return is 8 percent. For all securities, the inflation risk premium is 1.75 percent and the real interest rate is 3.5 percent. The security's liquidity risk premium ...

A corporation has an outstanding bond with the following

A corporation has an outstanding bond with the following characteristics: Coupon rate = 6.0% Interest payments - Semi-annually Face value = $1,000 Years to maturity = 20 Current market value = $1,054.88 Find the yield to ...

Corporate finance chapter 6 6 1 how to determine the future

Corporate finance chapter 6. 6. 1. How to determine the future and present value of investments with multiple cash flows? Explain theoretically

What is the price of company as stockwe know company a pay

What is the price of Company A's stock. We know company A pay dividend twice a year. And its beta=1.5 Government bond's Coupon is 8.8 and Yield is 5%(which one you should use?) Last year company A paid two dividend 0.33, ...

Researchers at the university of pennsylvania school of

Researchers at the University of Pennsylvania School of Medicine have determined that children under 2 years old who sleep with the lights on have a 35% chance of becoming myopic before they are 16. Children who sleep in ...

Grant technologies needs 300000 to pay its supplier grants

Grant Technologies needs $300,000 to pay its supplier. Grant's bank is offering a 210-day simple interest loan with a quoted interest rate of 11 percent and a 20 percent compensating balance requirement. Assuming there a ...

A stock is trading at 78 per share the stock is expected to

A stock is trading at $78 per share. The stock is expected to have a year-end dividend of $5 per share (D1=$5), which is expected to grow at some constant rate g throughout time. The stock's required rate of return is 15 ...

4,153,160 Questions Asked
13,132 Experts
2,558,936 Questions Answered

Ask Experts for help!!

Looking for Assignment Help?

Start excelling in your Courses, Get help with Assignment

Write us your full requirement for evaluation and you will receive response within 20 minutes turnaround time.

Ask Now Help with Problems, Get a Best Answer

Recent Questions

Ask Basic Finance Expert