Khloe has a savings account that earns 3.13% compounded monthly. If she has $2,378 in the account today, what will the account balance be in 11 years?
$2,447.13
$2,452.43
$3,337.70
$3,353.86

- anonymous

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- katieb

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- anonymous

@jim_thompson5910 @phi

- jim_thompson5910

Use
FV = PV*(1+r/n)^(n*t)
where
FV = unknown
PV = 2378
r = 0.0313
n = 12 (compounded 12 times a year)
t = 11 years

- phi

any luck? Jim wrote it out (like setting the dinner table. Now serve the dinner), that is put in the numbers. You will want to use a calculator.

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## More answers

- anonymous

Xavier deposits $6 daily into an interest-bearing account to save for renovations to his bathroom. The account earns 4.57% which compounds annually. What is the present value of the investment if Xavier renovates his bathroom in five years?
$11,785.32
$10,033.83
$7,843.83
$9,595.32
@jim_thompson5910

- jim_thompson5910

are you familiar with annuities at all?

- anonymous

yes

- anonymous

But I am not sure whether to use PVOA or PVAD

- jim_thompson5910

PVOA = present value of ordinary annuity
PVAD = present value of annuity due

- jim_thompson5910

they're basically the same but the annuity due is where the payment is made at the beginning of the period (eg: rent)

- anonymous

Yeah I know what they are but I am not which one to use in this scneario

- jim_thompson5910

in this case, you use PVOA because the payment is made at the end of the period

- anonymous

oh ok

- anonymous

So I am trying to figure out how would I plug in the values

- anonymous

Because Xavier is depositing 6 dollars daily

- jim_thompson5910

hint: assume 365 days in a year
(6 dollars per day) * (365 days per year) = 6*365 = 2190 dollars per year

- jim_thompson5910

if the payment frequency doesn't match with the compounding frequency, that is your first goal: to get them to line up somehow

- jim_thompson5910

so instead of thinking "6 dollars per day", think "2190 dollars per year" because the money is compounded annually

- anonymous

would that be then used as the C in the equation

- jim_thompson5910

yeah that's the cash flow C

- anonymous

then the interest rate would be 0.0457/12 right?

- anonymous

and 12 would be n right?

- jim_thompson5910

the /12 part is only if you compound montly

- jim_thompson5910

but we're actually compounding annually

- anonymous

so????

- jim_thompson5910

what formula are you using again? can you draw it out?

- anonymous

|dw:1434671280661:dw|

- jim_thompson5910

thanks

- anonymous

your welcome

- jim_thompson5910

So in this case,
C = 2190 is deposited every year
i = r/1 = 0.0457/1 = 0.0457
n = 1 (compounding frequency)
t = 5 years

- jim_thompson5910

\[\Large PVOA = C*\left(\frac{1}{i} - \frac{1}{i*(1+i)^{n*t}}\right)\]
\[\Large PVOA = 2190*\left(\frac{1}{0.0457} - \frac{1}{0.0457*(1+0.0457)^{1*5}}\right)\]
\[\Large PVOA = ???\]

- anonymous

PVOA=9595.32

- jim_thompson5910

I'm getting the same

- anonymous

here is another one
Adrian and Eva received a mortgage for $245,350 on a house that cost $266,100. They purchased 3 discount points and 2 origination points. What is the cost for the discount and origination points?
discount points: $4,907.00; origination points: $7,360.50
discount points: $5,322.00; origination points: $7,903.00
discount points: $7,360.50; origination points: $4,907.00
discount points: $7,903.00; origination points: $5,322.00

- jim_thompson5910

Discount points (see attached)
http://www.investopedia.com/terms/d/discountpoints.asp

##### 1 Attachment

- jim_thompson5910

origination points follow pretty much the same guideline
http://www.investopedia.com/terms/o/originationpoints.asp

- anonymous

with that do i have to calculate what it is

- jim_thompson5910

yes you basically take 1% of the mortgage to get the cost of 1 point
then multiply by 3 to get the cost of 3 points

- anonymous

which would let to my answer?

- jim_thompson5910

yeah you'll get to the answer by following those steps

- anonymous

Jeremiah invested $1,200 in a Certificate of Deposit, $3,500 in a corporate bond, $900 in a common stock, and $2,475 in a preferred stock, The COD has a rate of return of 2.1%; the corporate bond is –1.3%; the common stock’s rate of return is 4.1%; and the preferred stock has a rate of return of 5.5%. What is the weighted mean, mean and median overall rate of return on Jeremiah’s investment portfolio?
Weighted Mean: 1.9%; Mean: 2.6%; Median: 3.1%
Weighted Mean: 1.9%; Mean: 3.3%; Median: 3.1%
Weighted Mean: 2.6%; Mean: 1.9%; Median; 2.1%
Weighted Mean: 2.6%; Mean 2.6%; Median: 2.1%

- anonymous

I am completely lost on how to solve this one

- jim_thompson5910

let me think

- anonymous

ok

- jim_thompson5910

Ok this isn't too bad. The most work will be done with the weighted mean, so we'll put that off til last

- jim_thompson5910

to find the mean, you simply add up all the percentages and divide by 4
ignore the % signs

- anonymous

when i added all of the rates and divided by 4 i got 6.275

- anonymous

the rates of return

- jim_thompson5910

2.1+(-1.3)+4.1+5.5 = 10.4
10.4/4 = 2.6

- jim_thompson5910

do you see how I got that?

- anonymous

oh yes yes i do

- anonymous

ok so then from there we do what?

- jim_thompson5910

so that's the mean rate of return
2.6%

- jim_thompson5910

to find the median rate of return, sort the rates of return from smallest to biggest
-1.3, 2.1, 4.1, 5.5
I dropped the percent signs to make things easier

- jim_thompson5910

find the median of -1.3, 2.1, 4.1, 5.5

- anonymous

so i add them together and basically divide again @jim_thompson5910

- jim_thompson5910

with the median, you will look for the middle-most number

- jim_thompson5910

if there are 2 numbers in the middle, add them up and divide by 2

- anonymous

2.1+4.1=6.2/2=3.1

- anonymous

right?

- anonymous

@jim_thompson5910

- jim_thompson5910

yep 3.1 is the median

- jim_thompson5910

finally onto the weighted mean

- jim_thompson5910

first add up all of the dollar figures invested:
1200+3500+900+2475 = 8075
a total of $8075 was invested

- jim_thompson5910

what you do from here is multiply the portion invested as a fraction of the whole total investment by the rate of return
example: for the Certificate of Deposit,
(1200/8075)*2.1 = 0.31207430340558
another example: corporate bond
(3500/8075)*(-1.3) = -0.56346749226007
do this for the other investment types
does that make sense?

- anonymous

oh ok

- jim_thompson5910

tell me what you get

- anonymous

-1.9

- anonymous

@jim_thompson5910

- jim_thompson5910

Certificate of Deposit,
(1200/8075)*2.1 = 0.31207430340558
corporate bond
(3500/8075)*(-1.3) = -0.56346749226007
common stock
(900/8075)*4.1 = 0.45696594427244
preferred stock
(2475/8075)*5.5 = 1.68575851393189
did you get this?

- anonymous

um

- anonymous

let me check

- anonymous

ohhhhhh

- anonymous

yes yes yes

- jim_thompson5910

ok great

- jim_thompson5910

now we add up the sub-results
0.31207430340558+(-0.56346749226007)+0.45696594427244+1.68575851393189 = 1.89133126934984

- jim_thompson5910

1.89133126934984 rounds to 1.9

- jim_thompson5910

So that's why the weighted mean is 1.9%

- anonymous

Yup

- anonymous

These next ones is just to check if the answer is correct @jim

- anonymous

@jim_thompson5910

- anonymous

Faith wants to retire in 35 years. She makes annual contributions to a Roth IRA in the amount of $3,950. She is taxed at 35% today, but anticipates that will change to 25% in her retirement. If the average annual rate of return on the account is 6.3%, what is the net value of Faith’s IRA account when she retires?
$305,053.33
$351,984.61
$420,925.32
$434,750.32

- anonymous

I put B

- jim_thompson5910

one sec

- anonymous

Jake and Kate made a down payment of 16% on a house that cost $267,450. They are charged an origination fee of 0.5%, an intangible tax of 0.2%, and bought two discount points. What did Jake and Kate pay in total for the down payment, fees, taxes, and points?
$43,947.38
$47,285.16
$48,857.77
$50,013.15<----- my response

- jim_thompson5910

the first one with faith is incorrect

- jim_thompson5910

you will use a FVOA formula
then apply the 35% tax

- anonymous

Paige made a down payment of 12% on a home she purchased for $403,450 and financed the rest. What is the total cost of intangible taxes if her state charges 0.2% for intangible taxes?
$484.14
$710.07
$806.90
$968.28<----- my response

- anonymous

and ok

- anonymous

Fifteen years ago, Asher bought four different stocks at their lowest price of the day. He purchased 57 shares of McDoe’s at $78 per share; 78 shares of Younger, Inc. cost him $23 per share; 90 shares of Alfa Goods went for $86 per share; and 64 shares of Hooper, Rex, and Co. had a price of $69 per share. Today, he sold all of his shares in each company. He received $5,313 for McDoe’s, with annual dividends of $12 per year, $2,776 for Younger, Inc, $9,657 for Alfa Goods, and $6,701 for Hooper, Rex, and Co. On which investment did Asher receive the greatest rate of return?
McDoe’s<----- my response
Younger, Inc.
Alfa Goods
Hooper, Rex, and Co

- anonymous

are they wrong @jim_thompson5910

- jim_thompson5910

I'm checking the Jake and Kate one

- jim_thompson5910

Jake and Kate made a down payment of 16% on a house that cost $267,450. They are charged an origination fee of 0.5%, an intangible tax of 0.2%, and bought two discount points. What did Jake and Kate pay in total for the down payment, fees, taxes, and points?
$43,947.38
$47,285.16
$48,857.77
$50,013.15
--------------------------------------------
--------------------------------------------
Mortgage Amount = (1-0.16)*267450 = 224658
Down Payment: 0.16*267450 = 42792
Origination Fee: 0.005*224658 = 1123.29
Intangible Tax: 0.002*224658 = 449.316
Discount Points: 2*0.01*224658 = 4493.16
Add up the results: 42792+1123.29+449.316+4493.16 = 48,857.766 = 48,857.77
So Jake and Kate paid a total of $48,857.77

- anonymous

and the other 2 @jim_thompson5910

- jim_thompson5910

Paige made a down payment of 12% on a home she purchased for $403,450 and financed the rest. What is the total cost of intangible taxes if her state charges 0.2% for intangible taxes?
$484.14
$710.07
$806.90
$968.28
--------------------------------------------
--------------------------------------------
Downpayment: 0.12*403450 = 48,414
Mortgaged Amount: 403450-48414 = 355036
Intangible Taxes = 0.2% of mortgaged amount = 0.002*355036 = 710.072 = 710.07

- anonymous

and the asher?

- jim_thompson5910

still calculating that one

- anonymous

ok

- jim_thompson5910

Fifteen years ago, Asher bought four different stocks at their lowest price of the day. He purchased 57 shares of McDoe’s at $78 per share; 78 shares of Younger, Inc. cost him $23 per share; 90 shares of Alfa Goods went for $86 per share; and 64 shares of Hooper, Rex, and Co. had a price of $69 per share. Today, he sold all of his shares in each company. He received $5,313 for McDoe’s, with annual dividends of $12 per year, $2,776 for Younger, Inc, $9,657 for Alfa Goods, and $6,701 for Hooper, Rex, and Co. On which investment did Asher receive the greatest rate of return?
McDoe’s
Younger, Inc.
Alfa Goods
Hooper, Rex, and Co
------------------------------------------------
------------------------------------------------
McDoe’s:
bought 57 shares at $78 a share, so paid a total of 57*78 = $4,446
sold them to get $5,313 plus 12*15 = 180 dollars in dividends
rate of return = (total revenue - total cost)/(total cost) = (5313+180 - 4446)/4446 = 0.23549257759784
Younger, Inc.
bought 78 shares at $23 a share, total cost = 78*23 = 1,794
got $2,776 for selling them
rate of return = (total revenue - total cost)/(total cost) = (2776-1794)/1794 = 0.5473801560758
Alfa Goods:
bought 90 shares at $86 a share ----> total cost = 90*86 = 7740
sold them for $9657
rate of return = (total revenue - total cost)/(total cost) = (9657-7740)/7740 = 0.24767441860466
Hooper, Rex, and Co.
bought 64 shares at $69 a share: total cost = 64*69 = 4416
sold them for $6,701
rate of return = (total revenue - total cost)/(total cost) = (6701-4416)/4416 = 0.5174365942029
----------------------------------------
Summary of Rates of return
McDoe’s:
rate of return = 0.23549257759784
Younger, Inc.
rate of return = 0.5473801560758
Alfa Goods:
rate of return = 0.24767441860466
Hooper, Rex, and Co.
rate of return = 0.5174365942029

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