Tuesday, December 8, 2009

On Q #4 from HW #3

For part b of question 4 on HW #3:

4. Savings and interest:

a. How much money should I save each year if I want to have $100,000 saved in 10 years, if I put the money into a savings account earning 5% interest compounding annually? If I can earn 10% in the stock market?
b. How much should I be willing to pay for a $1,000 bond redeemable in 5 years if my personal interest rate is 5%? 10%?

Assume that you will be redeeming the bond for its face value in 5 years, with no payments until then.


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