Mathematics of Finance Assignment 3

F2

20 Marks

Work in groups.

Name(s):

#

W :

Show all work. Circle your final answer

1. (3 Marks) What sum of money must be set aside at a child’s birth to provide for 9 annual payments of

W

$20,000 to pay for the child’s post-secondary education? The first payment comes on the child’s 19th

birthday. The interest rate is 6% compounded annually.

A = 20 000 / 1 – ( 4 + 0.06 ) = 236 633, 8455

S

The sum of money need to set aside equal :quot;

156035, 8455 –

(1 + 0 06) 18 –

= 47658. 61

Z

2. (3 Marks) You would like to open a business in 3 years. This business will require $500,000 to startup. How

much should you deposit at the end of each month for the next three years into an account so that you will

tion

con

have the required $500,000 at the end of three years. This account already has $100,000 in it. The interest

rate is 6% compounded monthly.

3. (3 Marks) Jill deposits $100 at the beginning of each month into an account paying 6% compounded

monthly. She makes these monthly deposits for 5 years. How much money is in her account at the end of 5

years.

(3 Marks) $10,000 is borrowed today at an interest rate of 6% compounded annually. The loan is to be

repaid with 6 annual payments, with the first payment coming at the end of 3 years. What is the size of the

annual payment?Math