A brokerage account has been set up with an initial investment of $50,000. This $50,000 portion will earn 6% annually. Quarterly investment amounts of $7,000 for 60 periods follow the initial investment, which will earn 7%. At the end of the 60 periods, $100,000 will be withdrawn. The balance remaining after the $100,000 withdrawal is invested in the market for three years. At the end of the three additional years, the account is closed and the final balance of $679,313.65 is withdrawn. What annual return was earned for the last 3 years of this investment? a. −3.36% b. +3.46% c. −3.46% d. Answer cannot be calculated from information given. What is the stated annual percentage rate (APR) for an annuity due with 48 monthly payments of $500 and with a future value of $28,976.06? a. 0.75% b. 9% c. 10% d. 11%
Q1: -3.36% – choice A 1. PV = -50, N=15, I/y=6 FV = 119.828 2. PMT=-7 N=60 I/Y = 1.75 FV = 732.727 3. After withdrawing 100 --> PV = 119.828 + 732.727 - 100 = 752.555 4. PV = -752.555, FV = 679.31365, N = 3 I/Y = -3.36% Q2: APR = 9% choice C BGN, PMT = -500, FV = 28976.06, N=48 I/Y = .75 APR = .75 * 12 = 9
easy ones … answers are 3.3554% and 9% as rightly calculated by cpk. - Dinesh S
What does denotes?
- sign I believe…
It seems like in most examples in which payments are made into investment accounts, an annuity due would be used. Can anyone give any insight as to why we wouldn’t in this case?