d. Using information from (la) only, what quarterly compounded interest rate should the bank quote in order to provide the same interest as the 10% annual rate? What should be the quoted continuously compounded rate if it is to be the same as the 10% annual rate? Provide the rates per annum. e. What is the APR? Do we use APR or EAR when we are calculating the present value of an investment?
d. Using information from (la) only, what quarterly compounded interest rate should the bank quote in order to provide the same interest as the 10% annual rate? What should be the quoted continuously compounded rate if it is to be the same as the 10% annual rate? Provide the rates per annum. e. What is the APR? Do we use APR or EAR when we are calculating the present value of an investment?
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
Related questions
Question
d and e please
Transcribed Image Text:You deposit $4,000 today in a bank that promises to pay an annual interest of 8%?
What is future value of this sum at the end of 12 years?
b. What if the bank pays 8% interest compounded monthly? What if the bank pays
8% interest compounded quarterly?
What interest will the bank have to pay if the future value has to be $12,000 at the
end of 12 years?
d. Using information from (la) only, what quarterly compounded interest rate
should the bank quote in order to provide the same interest as the 10% annual
rate? What should be the quoted continuously compounded rate if it is to be the
same as the 10% annual rate? Provide the rates per annum.
What is the APR? Do we use APR or EAR when we are calculating the present
а.
с.
е.
value of an investment?
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
Step by step
Solved in 3 steps
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.Recommended textbooks for you
Essentials Of Investments
Finance
ISBN:
9781260013924
Author:
Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:
Mcgraw-hill Education,
Essentials Of Investments
Finance
ISBN:
9781260013924
Author:
Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:
Mcgraw-hill Education,
Foundations Of Finance
Finance
ISBN:
9780134897264
Author:
KEOWN, Arthur J., Martin, John D., PETTY, J. William
Publisher:
Pearson,
Fundamentals of Financial Management (MindTap Cou…
Finance
ISBN:
9781337395250
Author:
Eugene F. Brigham, Joel F. Houston
Publisher:
Cengage Learning
Corporate Finance (The Mcgraw-hill/Irwin Series i…
Finance
ISBN:
9780077861759
Author:
Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor
Publisher:
McGraw-Hill Education