Finance Questions

Archive for May, 2010

Question: Finance Question regarding investing, APR and EPR?- any help is appreciated?

Basima currently has $9,500 at an investment bank. She began investing 8 years ago at 6% Annual Percentage Rate (APR) or quoted rate. About 2 years ago, Basima began her full-time employment and could have contributed a lumpsum amount of $2,300 at the end of year 7 and another lumpsum amount of $3,200 at the end of year 8.
a) How much did Basima invest in this account 8 years ago? (show timeline)
b) If Basima actually contributed those 2 lumpsum amounts at the end of year 7 and 8, what would have been the current value of her account today? (show timeline)
c) Going forward from today, Basima will earn 8% APR for the next 4 years. What is the future value of her investment if her account is currently worth $9,500? (show timeline)
e) Another local investment bank has offered her an interest rate of 10% APR compounded monthly. Calculate the Effective Annual Rate (EAR) and the Effective Periodic Rate (EPR) if Basima were to invest

Answer: OK I don't have my Finance Calculator with me right now (if I remember I will comeback and answer it.) But to figure it out all you need to do is
a.) put in FV=$9,500, (I) 6% and (N or time) of 8 years then press PV for present value and it will tell you how much she started with.
time line will look something like this.
1-------2-------3-------4-------
5------6-------7------8

8 will = $9,500 1 will = PV answer from above, 2-7 will be the interest on the PV from 1

b.) To find this answer on the time line 1-6 will be the same
for 7 put in the interest for that year plus add her payment of $2,300 which will not get any interest because it is at the end of the year. Then calculate the interest on that for year 8 and add to it the deposit of $3,200 w/ no interest because its at year end. That will give you the balance at year 8 (or today)

c.) is easy just put in PV=9,500,I=8%, N=4 then press FV for the answer.

For e.) I am not to sure I do now that you need to change your calulator from Intrest Compounded daily to compunded monthly.

I hope this helps

OK here you go
a.) = $5885.48
b.) = $15,141.87
c.)= $13,068.83

all of these number are intrest compounded monthly. So at 6% that would be .50 monthly or 6/12
I hope this is right it has been a while

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Question: Republicans who like their current health care, how would you feel if your company did this to you?

"GE is forcing its 75,000 salaried U.S. employees and 8,000 retirees under the age of 65 to choose what's known as a consumer-directed health plan, which includes deductibles that run as high as $4,000 a year. Traditional plans, where employees pay higher premiums in exchange for predictable co-pays up front, are no longer available for salaried workers. One employee says his colleagues "are looking at this as a cut in pay."

Answer: I would be mad but I would get over it. Is it their responsibility to take care of you or is it your responsibility to take care of you?

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