University:
Cornell University
Course:
NBA 4120 | Equity Investment Research and Analysis
Academic year:

2024
Views:

302

Pages:

8
Author:

larbiwxcvbn

Worksheet Day 1 Notebook 1. Investing A man invests $5,000 in an account that pays 8.5% interest per year, compounded quarterly. a. Find the amount after 3 years. 5000(1 + 0.085/4)^(4*3) = 6435.09 b. How long will it take for the investment to double? 2 = (1 + 0.085/4)^(4t) log2 = 4t log(1 + 0.085/4) t = 8.24 Worksheet Day 1 Notebook 2. Investing A man invests $6,500 in an account that pays 6% interest per year, compounded continuously. a. What is the amount after 2 years? 1 7328.73 b. How long will it take for the amount to be $8,000? 6500e^(0.06t) = 8000 e^(0.06t) = 8000/6500 e^(0.06t) = 80/65 ln(80/65) = 0.06t t ≈ 3.46 Worksheet Day 1 Notebook 3. Investing: Find the time required for an investment of $5,000 to grow to $8,000 at an interest rate of 7.5% per year, compounded quarterly. 8000 = 5000(1 + 0.075/4)^(4t) 8/5 = (1 + 0.075/4)^(4t) ln(8/5) = 4t ln(1 + 0.075/4) t ≈ 4.16 years 4. Investing: Nancy wants to invest $4,000 in a savings certificate that earns an interest rate of 9.75% per year, compounded semiannually. How long a time period should she choose in order to save an amount of $5,000? 5000 = 4000(1 + 0.0975/2)^(2t) 5/4 = (1 + 0.0975/2)^(2t) ln(5/4) = 2t ln(1 + 0.0975/2) t ≈ 2.34 years Worksheet Day 1 Notebook 5. Investing: How long will it take for an investment of $1,000 to double in value if the interest rate is 8.5% per year, compounded continuously? 2 = e^(0.085t) ln2 = 0.085t t ≈ 8.15 6. Investing: A sum of $1,000 was invested for 4 years, and the interest was compounded semiannually. If this sum amounted to $1,435.77 in the given time, what was the interest rate? 1435.77 = 1000(1 + r/2)^(2*4) 1435.77 / 1000 = (1 + r/2)^8 (1435.77 / 1000)^(1/8) = 1 + r/2 r/2 ≈ 0.046 r ≈ 9.2%

Invest Worksheet Day 1 Notes Answers

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