I NEED HELP ASAP NEED TO HAND IN!

Question

1.Heather makes regular contributions to her Registered Retirement Savings Plan (RRSP). Which investment schedule would provide for the greatest accumulated amount after one year?

A) $1200 invested on January 1 and on July 1 at 6% compounded semi-annually.

B) $600 invested on January 1, April 1, July 1, and October 1 at 6% compounded quarterly.

C) $2400 invested on January 1 at 6% compounded annually.

D) $200 invested on the first day of each month at 6% compounded monthly.

2.An investment of $350 in blue chip stocks grows to $358.24 in 8 months. If this growth rate were to continue for a year, what would be the annual return on investment, ROI?

A)1.54%

B) 1.92%

C) 3.53%

D) 0.68%

3.You purhased 47 shares in Addle Computers in 1999 for $3.25/share. Today you want to sell them for $31.92/share and invest the entire amount in Canada Savings bonds, which you feel are less risky. Canada Savings Compound Interest Bonds are currently issued earning 734% interest, compounded annually. What is the return on investment, ROI, on the Addle shares and what will the maturity value for the Canada Savings bond be if it matures in 7 years?

A) ROI is 8.82% and the MV is $10,616.25

B) ROI is 882% and the MV is $2,374.44

C)ROI is 8.82% and the MV is $2,314.12

D) ROI is 882% and the MV is $2,529.77

4.If you invest $2,000.00 for 6 years in each of the following Guaranteed Investment Certificates (GICs), how much greater are your earnings with the best one than with the worst one?

I. 8% compounded annually

II. 7.75% compounded quarterly

III. 7.5% compounded daily

A) $37.27

B) $6.21

C) $24.85

D)$33.42

5.Your parents are saving for your post secondary education so they want $18,000 in a savings account for you in 5 years. How much should be invested now at 5.8% annual interest, compounded weekly, in order to save enough for your schooling?

A) $24,051.60

B) $9,876.53

C) $13,587.44

D) $13,470.92

Answer 1

For Question 1. We can tackle this several ways. We want look at the future value of each deposit/payment stream or we can look at the present value of each payment stream..

Let Today = Jan1.

Further, :Let's determine the PV approach.

If we deposit 2400 today the PV = 2400

If we deposit 1200 today and 1200 in six months the PV = 1200 plus the PV of 1200 discounted back one period

If we deposit 500 today and 600 every three months earning 6%/4 we discount the last three cash flows back to PV.

Recall the payment formula

PV = Payment*K

where K = (1/i)(1-(1/(1+i))^n)

So

for two deposits we have

K2= (1/3%)(1-(1/(1+3%))) = .97087

for 4 deposits

K4 =(1/(6%/4)(1- (1/(1+6$/4)^3)=2.9122

for 12 payments we have

K12 = (1/0.5%)(1-(1/(1+0.5%))^11)=10.677

so our Present values are

1 Payment = 2400,

2 Payments = 1200 + 1200*K2 =2,365.05

4 payments = 600 + 600*K4= 2347.32

12 Payments = 200 + 200* k12=2,335.41

Now we take the present values and bring them to Future Value.

The four Future Value factors are

FV1 - 1+6% = 1.06

FV2 = (1+6%/2)^2 = 1.0609

FV4 = (1+6%/4)^4 = 1.06136

FV12 = (1+6%/12)^12 = 1.06168

so in one year, a single deposit yields

2400*1.06 = 2.509.08

2 1200 deposits yields 2,365.05*1.0609 =2,509.08

4 600 deposits = 2347.32*1.06136= 2.491.36

12 200 deposits =2,335.41*1.06168=2,475.45

Question 2

The asset has grown ate rate g for 8 months or (8/12) years.

so (1+g)^(8/12) = 358.24/350 = 1.02354 = (1+g)^(2/3).

If we cube Both sides we get

(1+g)²=(1.02354)³ = 1.0723.

Now take square root of both sides and get

1+g = (1.0723)^(1/2) = 1.03552

so g = 3.552% or answer c

For 3 I will help you set it up. $3.25 is now worth is now worth 31.92.

ROI=(current Value=Price Paide)/Price paid

Current value of Stock position is 47 shares times $31.92 = This compounds at 7.34% so 1 dollar in seven years is worth 1.64184. I think you have a bad interest rate as none of the MV's in your choices add up.

4 and 5 are straight forward. I am not going to do your whole assignment for you. If you want helps reach out to me.

lenny.dendunnen

I was a professor of economics at Tufts and have spent many years in Finance (Wall Street).