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## anonymous one year ago 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 • This Question is Closed 1. anonymous @jim_thompson5910 @phi 2. 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 3. 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. 4. 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

5. jim_thompson5910

are you familiar with annuities at all?

6. anonymous

yes

7. anonymous

But I am not sure whether to use PVOA or PVAD

8. jim_thompson5910

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

9. 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)

10. anonymous

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

11. jim_thompson5910

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

12. anonymous

oh ok

13. anonymous

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

14. anonymous

Because Xavier is depositing 6 dollars daily

15. jim_thompson5910

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

16. 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

17. jim_thompson5910

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

18. anonymous

would that be then used as the C in the equation

19. jim_thompson5910

yeah that's the cash flow C

20. anonymous

then the interest rate would be 0.0457/12 right?

21. anonymous

and 12 would be n right?

22. jim_thompson5910

the /12 part is only if you compound montly

23. jim_thompson5910

but we're actually compounding annually

24. anonymous

so????

25. jim_thompson5910

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

26. anonymous

|dw:1434671280661:dw|

27. jim_thompson5910

thanks

28. anonymous

your welcome

29. 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

30. jim_thompson5910

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

31. anonymous

PVOA=9595.32

32. jim_thompson5910

I'm getting the same

33. 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

34. jim_thompson5910

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

35. jim_thompson5910

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

36. anonymous

with that do i have to calculate what it is

37. 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

38. anonymous

which would let to my answer?

39. jim_thompson5910

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

40. 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%

41. anonymous

I am completely lost on how to solve this one

42. jim_thompson5910

let me think

43. anonymous

ok

44. 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

45. jim_thompson5910

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

46. anonymous

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

47. anonymous

the rates of return

48. jim_thompson5910

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

49. jim_thompson5910

do you see how I got that?

50. anonymous

oh yes yes i do

51. anonymous

ok so then from there we do what?

52. jim_thompson5910

so that's the mean rate of return 2.6%

53. 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

54. jim_thompson5910

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

55. anonymous

so i add them together and basically divide again @jim_thompson5910

56. jim_thompson5910

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

57. jim_thompson5910

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

58. anonymous

2.1+4.1=6.2/2=3.1

59. anonymous

right?

60. anonymous

@jim_thompson5910

61. jim_thompson5910

yep 3.1 is the median

62. jim_thompson5910

finally onto the weighted mean

63. jim_thompson5910

first add up all of the dollar figures invested: 1200+3500+900+2475 = 8075 a total of $8075 was invested 64. 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? 65. anonymous oh ok 66. jim_thompson5910 tell me what you get 67. anonymous -1.9 68. anonymous @jim_thompson5910 69. 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? 70. anonymous um 71. anonymous let me check 72. anonymous ohhhhhh 73. anonymous yes yes yes 74. jim_thompson5910 ok great 75. jim_thompson5910 now we add up the sub-results 0.31207430340558+(-0.56346749226007)+0.45696594427244+1.68575851393189 = 1.89133126934984 76. jim_thompson5910 1.89133126934984 rounds to 1.9 77. jim_thompson5910 So that's why the weighted mean is 1.9% 78. anonymous Yup 79. anonymous These next ones is just to check if the answer is correct @jim 80. anonymous @jim_thompson5910 81. 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

82. anonymous

I put B

83. jim_thompson5910

one sec

84. 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 85. jim_thompson5910 the first one with faith is incorrect 86. jim_thompson5910 you will use a FVOA formula then apply the 35% tax 87. 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

88. anonymous

and ok

89. 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 90. anonymous are they wrong @jim_thompson5910 91. jim_thompson5910 I'm checking the Jake and Kate one 92. 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 93. anonymous and the other 2 @jim_thompson5910 94. 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

95. anonymous

and the asher?

96. jim_thompson5910

still calculating that one

97. anonymous

ok

98. 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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