Finance Assignment #1

University:
Stanford University
Course:
Introduction to Mathematical Thinking
Academic year:

2023
Views:

165

Pages:

2
Author:

MAlphen

Finance 1 Peter invested a sum of money in an account paying compound interest [3] at 1.5% per year. After 8 years, the money had earned total interest of $3162.32. Calculate the sum of money Peter invested in the account. 2 Peter invested $5 000 in Bank A which offered a compound interest of 1.2% per annum, compounded half-yearly. (i) Find the total amount he had at the end of the 2 years. [3] At the end of the second year, Peter wirhdrew all the money in Bank A and invested in Bank B which offered a simple interest rate of 5.25% per annum. (ii) Find the minimum number of years he had to leave the money in order for the interest to be more than $10 000. Finance 1 Solution: 8 3162.32 = 𝑃 (1 + 1.5 ) − 𝑃 100 𝑃 = 3162.32 1.0158−1 𝑆 = $25 000 or $25 000.04 Ans: $25 000 or $25 000.04 [3] 2 Solutions: (i) 4 5000 (1 + 1.2÷2 = $5121.08 ) 100 (ii) 5121.08×5.25×𝑇 > 10000 100 𝑇 > 10000×100 5121.08×5.25 𝑇 > 37.195 Minimum no. of years= 38 Ans: (i) $5121.08 (ii) 38 years