How would you determine the size of the annual end-of-year deposits needed to accumulate a given future sum, at the end of a specified future period? What effect does the magnitude of the interest rate have on the size of the deposits needed?
Answer to relevant QuestionsWhat relationship exists between the calculation of the present value of an annuity and amortization of a loan? How can you find the amount of interest paid each year under an amortized loan? How would (a) an increase in the discount rate or (b) a decrease in the time period until the cash flow is received affect the present value? Why? Look at the formula for the present value of an annuity. What happens to the numerator as the number of periods increases? What distinguishes an annuity from a perpetuity? Why can’t we calculate the future value of a ...You are given the series of cash flows shown in the following table. a. Calculate the compound annual growth rate associated with each cash flow stream. b. If year-1 values represent initial deposits in a savings account ...Explain why the height of the yield curve depends on inflation.
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