Before deciding to deposit her money at the credit union, Heather checked the interest rates at her local bank as well. The bank was paying a nominal interest rate of 9.8% compounded quarterly. If Heather had deposited $1,700 at her local bank, how much would she have had in her account after 13 years? O $644.03 $5,985.09 O $266.60 O $1,872.82
Before deciding to deposit her money at the credit union, Heather checked the interest rates at her local bank as well. The bank was paying a nominal interest rate of 9.8% compounded quarterly. If Heather had deposited $1,700 at her local bank, how much would she have had in her account after 13 years? O $644.03 $5,985.09 O $266.60 O $1,872.82
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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Transcribed Image Text:Before deciding to deposit her money at the credit union, Heather checked the interest rates at her local bank as well. The bank was paying a nominal
interest rate of 9.8% compounded quarterly. If Heather had deposited $1,700 at her local bank, how much would she have had in her account after 13
years?
O $644.03
O $5,985.09
O $266.60
O $1,872.82
Transcribed Image Text:2. Simple versus compound interest
Financial contracts involving investments, mortgages, loans, and so on are based on either a fixed or a variable interest rate. Assume that fixed
interest rates are used throughout this question.
Heather deposited $1,700 at her local credit union in a savings account at the rate of 9.8% paid as simple interest. She will earn interest once a year
for the next 13 years. If she were to make no additional deposits or withdrawals, how much money would the credit union owe Heather in 13 years?
O $3,865.80
O $5,731.65
O $1,882.93
O $266.60
Now, assume that Heather's credit union pays a compound interest rate of 9.8% compounded annually. All other things being equal, how much will
Heather have in her account after 13 years?
O $5,731.65
O $561.70
$1,866.60
O $3,865.80
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