3. You have the option of investing money in a bond that will help to grow your money. Bond A offers to pay an annual interest rate of 12%, compounded monthly. Bond B offers to pay at a nominal interest rate of 12% compounded quarterly. Bond C offers to pay an annual interest rate of 12% compunded continuously. a) Compute the effective interest rate ia for each of these bonds and select the best option for your investment. b) If you put $ 5000 into each bond, what would be your return after 5 years in each of these bonds?

Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
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3. You have the option of investing money in a bond that will help to grow your money. Bond
A offers to pay an annual interest rate of 12%, compounded monthly. Bond B offers to pay
at a nominal interest rate of 12% compounded quarterly. Bond C offers to pay an annual
interest rate of 12% compunded continuously.
a) Compute the effective interest rate ią for each of these bonds and select the best option
for your investment.
b) If you put $ 5000 into each bond, what would be your return after 5 years in each of
these bonds?
Transcribed Image Text:3. You have the option of investing money in a bond that will help to grow your money. Bond A offers to pay an annual interest rate of 12%, compounded monthly. Bond B offers to pay at a nominal interest rate of 12% compounded quarterly. Bond C offers to pay an annual interest rate of 12% compunded continuously. a) Compute the effective interest rate ią for each of these bonds and select the best option for your investment. b) If you put $ 5000 into each bond, what would be your return after 5 years in each of these bonds?
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