MM255 PROJECT 6 Rev 11.2011
MM255 PROJECT 6 Rev 11.2011
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Date Created: 11/14/15
Unit 6 Compound Interest Instructor Graded Project You must show your work on all problems You may type your answer right into this document Total points for project 45 points Projects must be submitted as a Microsoft Word document and uploaded to the Dropbox for Unit 6 All Projects are due by Tuesday at 1159 PM ET of the assigned Unit NOTE Project problems should not be posted to the Discussion threads Questions on the project problems should be addressed to the instructor by sending an email or by attending office hours Part Basic Computations 1 A Find the future value on 6000 in three years if the interest is compounded semiannually at 12 5 points Answer B What is the compound interest earned 5 points Answer 2 You have 12000 that you plan to invest in a compoundinterest bearing interest Your investment agent advises you that you can invest the 12000 at 8 compounded quarterly for three years or you can invest it at 8 14 compounded annually for three years Which investment should you choose to receive the most interest Show your work for calculating the interest for both options 10 points Answer Part II Case Study Willie owns and manages a number of realestate rental properties in town and enjoys being his own boss At 46 years old Willie gures he would like to retire after working for 10 more years so he is starting to think about investing for the future His latest investments have been successful after selling a fourunit apartment building and a town house Willie has 300000 in the bank and is debtfree With only 10 years before retirement Willie wants to make solid nancial decisions that will limit his risk exposure An attractive property has come on the market this week a pair of townhouses with a great view The rental units are in good condition and would need only some minor repairs in order to get them into shape for rental They are in a good location for vacationers and summer rentals The price tag for the two townhouses totals 225000 well within his range He gures he can invest the remaining 75000 and between the two hopes to have 600000 on which to retire by age 56 1 Willie knows that real estate in this general location appreciates by about 5 a year Assuming that this trend continues what will be the future value of the 225000 townhouses in 10 years 5 points Answer 2 Willie s local bank offers a 2year certi cate of deposit CD that pays 5 compounded quarterly A competing bank in town also offers a 2 year CD that pays 5 but the interest is componded daily If Willie invests the 75000 how much more money will he get from the second bank after two years due to the daily compounding assume exact time is used 5 points Answer 3 After purchasing the townhouses Willie receives an assessment from the town for 17500 due in 2 years to pay for road repairs and new sewer hookups for the properties How much would he need to invest today in a CD paying 5 compounded semiannually to fully pay the assessment in 2 years 5 points Answer 4 A friend of Willie s is a real estate developer and needs to borrow 75000 to nish a development project He is desparate for cash and offers Willie 18 compounded monthly for 2 12 years Given that he can invest the money at a sure 5 with the bank does this loan meet with Willie s goals for low risk investment Research some of the risks associated with this type of loan Can you think of any ways to reduce the risk 10 points Requirements Answer Write your essay in this document do not save it in a separate le You must clearly state your position with wellstructured paragraphs using proper grammar spelling and sentence structure This is not an opinion question you must offer evidence to support your position using properlycited sources Your answer must be between 150250 words about 1 page of text You must cite at least one source book website periodical using APA format Do not use unreliable sources such as Wikipedia and Yahoo Answers Students in MM255 may submit their projects to the Math Center for review Tutors will not grade or correct the project but they will provide guidance for improvement Students should submit assignments early enough to receive feedback and make corrections before the project due date 24 hour turnaround times MondayThursday and 48 hour turnaround times on weekends are typical Email projects to kumckaplanedu Please put quotproject reviewquot in the subject line of the message
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