Billy has 44,000 dollars to invest in a stock market. He wants to be advised on this matter, by a guy named Sam, who would do it for a fee. Sam tells Billy that there is a one-year investment that provides 13 percent interest, compounded monthly. a)What is the effective annual interest rate based on a 12 percent nominal annual rate and monthly compounding? b)Sam says that he can make the investment for a fee of 2 percent of the investment's value one year from now. if you invest 44,000 today, how much will you have at the end of one year (before Sam's fee)? c)What is the effective annual interest rate of this investment, including Sam's fee?
Billy has 44,000 dollars to invest in a stock market. He wants to be advised on this matter, by a guy named Sam, who would do it for a fee. Sam tells Billy that there is a one-year investment that provides 13 percent interest, compounded monthly. a)What is the effective annual interest rate based on a 12 percent nominal annual rate and monthly compounding? b)Sam says that he can make the investment for a fee of 2 percent of the investment's value one year from now. if you invest 44,000 today, how much will you have at the end of one year (before Sam's fee)? c)What is the effective annual interest rate of this investment, including Sam's fee?
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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Billy has 44,000 dollars to invest in a stock market. He wants to be advised on this matter, by a guy named Sam, who would do it for a fee. Sam tells Billy that there is a one-year investment that provides 13 percent interest, compounded monthly.
a)What is the effective annual interest rate based on a 12 percent nominal annual rate and monthly compounding?
b)Sam says that he can make the investment for a fee of 2 percent of the investment's value one year from now. if you invest 44,000 today, how much will you have at the end of one year (before Sam's fee)?
c)What is the effective annual interest rate of this investment, including Sam's fee?
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