If the discount rate on 3-month commercial paper is 4.9% while the yield on 3-month CDs is 5%, the real difference betweenthem in basis points (in terms of yield) is:(You may need to look up how many basis points there are in a percentage point)Select one:a.39O b. 0.39O c. 0.1O d. 10O e. 3.9

Discount rate: The rate of return used to discount future cash flows back to their present value is…

Answered: If the discount rate on 3-month…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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4. Looking forward - Future value Compounding Interest You know that paying yourself by depositing money in a savings account is a prudent start to your retirement plan. You determined that, based on your other obligations, you can save 7,375.00 per year via an annual, single year-end deposit. You are 40 years old now, so your money will grow for the next 25 years until you turn 65. You will open a savings account at the US Bank branch near your home. Its savings accounts are paying 6% interest. The following table shows the future value factors for various periods and interest rates: Future Value of an Annuity Factor 3% 6% 8% 9% 10% 5% 12.578 10.950 11.460 13.180 14.487 15.190 15.937 13.412 14.190 15.917 16.870 18.977 20.140 21.384 17.293 18.600 21.578 23.270 27.152 29.360 31.772 24.297 26.870 33.066 36.780 45.762 51.160 57.274 32.030 36.460 47.726 54.860 73.105 84.700 98.346 40.567 47.570 66.438 79.060 113.282 136.300 164.491 49.994 60.460 90.318 111.430 172.314 215.700 271.018…
Consider the following sequence of deposits & withdrawals over a period of 4 years. If you earn 10% interest, what would be the balance at the end of 4 years? ? $1,210 2 $1,000 $1,000 , $1,500 O a. $3,660.25 O b. $2,710.00 C. $ 3,352.79 O d. $2,981.00
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5 Question Let Ya,n be the present value of an n-year term continuous annuity of $1 per year for an insured aged x. Let Y be the present value of a whole life continuous annuity of $1 per year for an insured aged x. Given a constant force of interest, 8, show that: 1 бп Cov (Yz,n, Yz) = (A — e¯ðª‚„Ez (1 − Āz+n) — Ã‚±‚ñ¦Ã‚) 82 n. - -
6. An investor purchases a 30-year U.S. government bond for $840. The bond’s couponrate is 10 percent and, it still had twelve years remaining until maturity. If the investorholds the bond until it matures and collects the $1000 par value from the Treasuryand his marginal tax rate is 25 percent (we assume that the bond is taxable), what willbe his after-tax (effective) yield to maturity? Make sure to show your work.
1.Assuming you have an inflation linker that pays an annual coupon of 2.5% every half a year and the real yield is 3%. What will be the price of the if it matures after 3.5 assuming inflation is -2% principal of 100 that you bought directly from the government. Hint: Use the magic formula first and then decide whether u need an adjustment 98.35 96.38 95.3 NONE OF THE ABOVE
Suppose you are offered the alternative of receiving either $2,500 at the end of 6 years or $1,200 today. What interest would make you indifferent to your choice between $1,200 and the promise of $2,500 at the end of sixyears? OA 6% OC 13% OD 12% QUESTION 10 What single payment at the end of year 8 is equivalent to an equal annual series of payments Of $600 beginning at the end of yea r 3 and ending at the end of year 12? The interest rate is 20% compounded annually. 12 $600 44 4 4 44444 QUESTION 10 What single payment at the end of year 8 is equivalent to an equal annual series of payments Of $600 beginning at the end of yea r3 and ending at the end of year 12? The interest rate is 20% compounded annually $600 12 OA S4,347 OB 55216 OC S7511 OD S0.250
1. you are earning 7% annually and contributing the max allowable each year: if you want to have at least $1,000,000 in your IRA by age 60, what is the latest age you can start investing? b. Suppose you invest $3,000 and earn 7% interest per year on this investment. How many years will it take for your total investment to be worth $6,000 c. imagine the interest rate on your savings account was 0.5% per year and inflation was 2% per year. After one year, your ability to buy something with the money in this account with be: Question options: more than today less than today exactly the same impossible to say
6. You are given an annuity payable continuously at the rate of • $1000 per year while both (40) and (50) are alive • $600 per year while one of (40) and (50) is alive and the other is dead The present value of this annuity is $9400. A second annuity payable continuously at the rate of $1200 per ycar while either of them is alive has present value $13200. What is the present value of an annuity payable continuously at the rate of $1000 per year while one of (40) and (50) is alive and the other is dead?
▼ Cash Flow Present Discounted Value Interest Rate is based on the notion that a dollar paid in the future is less valuable than a dollar paid today. Part 2 The present value of a loan in which $3000 is to be paid out a year from today with the interest rate equal to 3% is $enter your response here. (Round your response to the neareast two decimal place) Part 3 If a loan is paid after two years, and the amount $3000 is to be paid then with a corresponding 1% interest rate, the present value of the loan is $enter your response here. (Round your response to the neareast two decimal place)
Calculate the maturity value of a 300-day, $6,000 simple interest term deposit earning 5.15%. O a. $7,021.99 O b. $6,309.00 O c. $6,111.78 O d. $6,253.97 e. $5,756.34

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