Browns Bank pays 8 percent simple interest on its savings account balances, whereas Raiders Bank pays 8 percent compounded annually. If you made a $5,000 deposit in each bank how much more money would you earn from your Raiders Bank account at the end of 10 years?
Risk and return
Before understanding the concept of Risk and Return in Financial Management, understanding the two-concept Risk and return individually is necessary.
Capital Asset Pricing Model
Capital asset pricing model, also known as CAPM, shows the relationship between the expected return of the investment and the market at risk. This concept is basically used particularly in the case of stocks or shares. It is also used across finance for pricing assets that have higher risk identity and for evaluating the expected returns for the assets given the risk of those assets and also the cost of capital.
- Browns Bank pays 8 percent simple interest on its savings account balances, whereas Raiders Bank pays 8 percent compounded annually. If you made a $5,000 deposit in each bank how much more money would you earn from your Raiders Bank account at the end of 10 years?
2.
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Find the EAR in each of the cases. Use 365 days a year
|
Year |
|
1 |
|
2 |
|
3 |
|
Year |
|
1 |
|
2 |
|
3 |
|
Stated Rate (APR) |
Number of Times Compounded |
8% Quarterly
Effective Rate
|
16 |
Monthly |
|
12 |
Daily |
15 Infinite
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