A bank offers two alternative interest schedules for a savings account of $100,000 locked in for 3 years: (a) a monthly rate of 1% and (b) an annually, continuously compounded rate of 12%. Which alternative should you choose? Hint: convert APR to EAR, then compare the two options

A bank offers two alternative interest schedules for a savings account of $100,000 locked in for 3 years: (a) a monthly rate of 1% and (b) an annually, continuously compounded rate of 12%. Which alternative should you choose? Hint: convert APR to EAR, then compare the two options

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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your credit card has a balance of $3000 in an annual interest rate of 17% with no further purchase charge to the card and the balance being paid off over five years. The monthly payment is $75 and the total interest paid is $1500. You can get a bank loan at 9.5% with a term of six years complete parts, a and B below. A. How much will you pay each month? How does this compare with the credit card payment each month? A. the monthly payment for the bank loan are approximately $__ This is $__ more than a monthly credit card payments. B. The monthly payments are the bank loan are approximately $__ This is $__ less than the monthly credit card payments. B.How much total interest will you pay? How does this compare with the total credit-card interest? A. The total interest paid over 3 years for the bank loan is approximately$__. This is $__ more than the total credit-card interest. B. The total interest paid over 3 years for the bank loan is approximately $__. This is $__ less than the…
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One bank offers to loan you money at an interest rate of 12% compounded quarterly, and another bank offers to loan you money at 11.8% compounded continuously. Which loan would you prefer, and why?
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