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. Emma deposited $500 in a savings account at her bank. Her account will earn an annual simple interest rate of 9%. If she makes no additional deposits or withdrawals, how much money will she have in her account in 11 years? O $145.00 O $1,290.21 O $995.00 O $549.05 Now, assume that Emma's savings institution modifies the terms of her account and agrees to pay 9% in compound interest on her $500 balance. All other things being equal, how much money will Emma have in her account in 11 years? O $1,290.21 O $116.12 O $545.00 O $995.00 Suppose Emma had deposited another $500 into a savings account at a second bank at the same time. The second bank also pays a nominal (or stated) interest rate of 9% but with quarterly compounding. Keeping everything else constant, how much money will Emma have in her account at this bank in 11 years? O $130.56 O $145.00 O $546.54 O $1,330.93
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. Emma deposited $500 in a savings account at her bank. Her account will earn an annual simple interest rate of 9%. If she makes no additional deposits or withdrawals, how much money will she have in her account in 11 years? O $145.00 O $1,290.21 O $995.00 O $549.05 Now, assume that Emma's savings institution modifies the terms of her account and agrees to pay 9% in compound interest on her $500 balance. All other things being equal, how much money will Emma have in her account in 11 years? O $1,290.21 O $116.12 O $545.00 O $995.00 Suppose Emma had deposited another $500 into a savings account at a second bank at the same time. The second bank also pays a nominal (or stated) interest rate of 9% but with quarterly compounding. Keeping everything else constant, how much money will Emma have in her account at this bank in 11 years? O $130.56 O $145.00 O $546.54 O $1,330.93
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: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.
Emma deposited $500 in a savings account at her bank. Her account will earn an annual simple interest rate of 9%. If she makes no additional
deposits or withdrawals, how much money will she have in her account in 11 years?
O $145.00
O $1,290.21
O $995.00
O $549.05
Now, assume that Emma's savings institution modifies the terms of her account and agrees to pay 9% in compound interest on her $500 balance. All
other things being equal, how much money will Emma have in her account in 11 years?
O $1,290.21
O $116.12
O $545.00
O $995.00
Suppose Emma had deposited another $500 into a savings account at a second bank at the same time. The second bank also pays a nominal (or
stated) interest rate of 9% but with quarterly compounding. Keeping everything else constant, how much money will Emma have in her account at
this bank in 11 years?
O $130.56
O $145.00
O $546.54
O $1,330.93
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