5. A bank claims in an advertisement that its certificates of deposit offe a nominal rate of 7.0% per annum, and an annual effective rate of 7.19% What does the frequency of compounding seem to be? (The advertisemen probably gives rounded figures.)

5. A bank claims in an advertisement that its certificates of deposit offe a nominal rate of 7.0% per annum, and an annual effective rate of 7.19% What does the frequency of compounding seem to be? (The advertisemen probably gives rounded figures.)

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

Section: Chapter Questions

Problem 1PS

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Treasury bills are currently paying 4.6 percent and the inflation rate is 1.9 percent. a. What is the approximate real rate of interest? (Enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) b. What is the exact real rate? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) a. Approximate real rate b. Exact real rate
The amount of simple interest on a deposit varies jointly with the principal and the time in days. If $17.85 is earned on a deposit of $3500 for 12 days, how much interest would be earned on a deposit of $3700 for 20 days? ... The deposit would earn S in interest. (Simplify your answer. Round to the nearest cent as needed.)
8. The following information about Lapus Incorporation that borrows by pledging its receivables are as follows: Average balance of accounts receivable Annual receivables turnover (360/ACP) Administrative fee charged on all new receivables Interest rate on outstanding loans Percent of receivables accepted What is the effective cost of financing stated as an annual rate? a. 12.0% b. 14.0% c. 21.6% d. 24.0% P100,000 6x 2% 12% 80%
A bank is considering using a “three against six” $2,000,000 FRA to cover its potential loss. The purpose of the FRA is to cover the interest rate risk caused by the maturity mismatch from having made a six-month Eurodollar loan and having accepted a three-month Eurodollar deposit. The agreement rate with the buyer is 4.6%. There are actually 92 days in the three-month FRA period. Which one of following statements is correct? Group of answer choices If the settlement rate is 4.8% three months from today, then the buyer pays the seller. To hedge the loss caused by maturity mismatch, the bank should be a seller of the FRA. Without the FRA, the bank will lose if the market interest rate drops at the end of three months. If the settlement rate is 4.8% three months from today, then the FRA is worth $1009.84 To hedge the risk caused by maturity mismatch, the bank could take the buyer’s position if it uses the Euro-Dollar Interest Rate Futures…
A bank is considering using a “three against six” $2,000,000 FRA to cover its potential loss. The purpose of the FRA is to cover the interest rate risk caused by the maturity mismatch from having made a six-month Eurodollar loan and having accepted a three-month Eurodollar deposit. The agreement rate with the buyer is 4.6%. There are actually 92 days in the three-month FRA period. Which one of following statements is correct? Group of answer choices To hedge the risk caused by maturity mismatch, the bank could take the buyer’s position if it uses the Euro-Dollar Interest Rate Futures instead. To hedge the loss caused by maturity mismatch, the bank should be a seller of the FRA. If the settlement rate is 4.8% three months from today, then the buyer pays the seller. If the settlement rate is 4.8% three months from today, then the FRA is worth $1009.84 Without the FRA, the bank will lose if the market interest rate drops at the end of three months.
25. The following interest-bearing promissory note was discounted at a bank by the payee before maturity. Use the ordinary interest method, 360 days, to calculate the missing information. (Round dollars to the nearest cent.) FaceValue InterestRate (%) Date ofNote Term ofNote (days) MaturityDate MaturityValue(in $) $2,200 12 Mar. 7 80 $ Date ofDiscount DiscountPeriod (days) DiscountRate (%) Proceeds(in $) Apr. 15 19 $
1.A bank CD that pays 7.38 percent compounded quarterly. (Round answer to 2 decimal places, e.g. 15.25%.) what is the effective annual rate %? 2. A bank CD that pays 7.38 percent compounded monthly. (Round answer to 2 decimal places, e.g. 15.25%.) whats is the Effective annual rate %?
On its savings accounts, the First National Bank offers a 5 percent nominal interest rate that is compounded monthly. Savings accounts at the Second National Bank have the same effective annual return, but interest is compounded quarterly. What nominal rate does the Second National Bank offer on its savings accounts? a. 5.12% b. 5.00% c. 5.02% d. 1.28% e. 5.22%
Handley Bank advertises that its standard lending rate is 12% per annum compounding quarterly. Which of the following rates represent effective rates that are consistent with the Handley Bank quoted rate (to two decimal places)? Group of answer choices A. More than one of the other options are correct B. 12.68% per annum compounding annually C. None of the other options are correct D. 3.00 % per quarter compounding quarterly E. 1.00 % per month compounding monthly

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