Solutions to Chapter 1

There is no interest on interest. After 10 years, you earn total interest of $400, and your account accumulates to $1,400. With compound interest, your account grows to: $1,000 ( (1.04)10 = $1480.24. Therefore $80.24 is interest on interest. 5. PV = $700/(1.05)5 = $548.47 6. Present Value Years Future Value Interest Rate a. $400 11 $684 b. $183 ... ................
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