19. Jennifer and Rex both receive a dividend from their 401(k) retirement plan every 6 months. The earning rates for this year have been 5% per year, compounded quarterly for Jennifer, and 4.85% per year, compounded monthly for Rex. Rex felt good about this because he knew the monthly com- pounding on his plan would make his APY higher than Jennifers APY. (a) Is Rex correct? Explain your answer. (b) What is the effective rate for each plan on the basis of the payment period?

19. Jennifer and Rex both receive a dividend from their 401(k) retirement plan every 6 months. The earning rates for this year have been 5% per year, compounded quarterly for Jennifer, and 4.85% per year, compounded monthly for Rex. Rex felt good about this because he knew the monthly com- pounding on his plan would make his APY higher than Jennifers APY. (a) Is Rex correct? Explain your answer. (b) What is the effective rate for each plan on the basis of the payment period?

Financial Accounting Intro Concepts Meth/Uses

14th Edition

ISBN:9781285595047

Author:Weil

Publisher:Weil

ChapterA: Appendix - Time Value Of Cash Flows: Compound Interest Concepts And Applications

Section: Chapter Questions

Problem 15E

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