1.1
1. Sally has two IRAs. IRA 1 earns interest at 8% effective annually and
IRA
2
earns
interest
at
10%
effective
annually.
She
has
not
made
any
contributions since January 1, 1985, when the amount in IRA 1 was twice
the amount in IRA 2.The sum of the two accounts on January 1, 1993 was
$75000. Determine how much was in IRA 2 on January 1, 1985?
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Individual Retirement Account
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2. Suppose we are given that the effective rate of interest is 5% in the
first year and 6% in the second year .We invest $1 at time 0. How much is
in the fund at the end of two years?
3. An investor puts 100 into Fund X and 100 into Fund Y. Fund Y earns
compound
interest
at
the
annual
rate
of
j,
and
Fund
X
earns
simple
interest at the annual rate of 1.05j . At the end of 2 years, the amount in
Fund Y is equal to the amount in Fund X. Calculate the amount in Fund Y
at the end of 5 years?
4. Eric deposits X into a savings account at time 0, which pays interest at
a nominal rate of i , compounded semiannually. Mike deposits 2X into a
different
savings
account
at
time
0,
which
pays
simple
interest
at
an
annual rate of i . Eric and Mike earn the same amount of interest during