Jim makes a deposit of $12,000 in a bank account. The deposit is to earn interest compounded annually at the rate of 6 percent for seven years.a. How much will Jim have on deposit at the end of seven years? (Hint: What is future value?)b. Assuming the deposit earned a 9 percent rate of interest compounded quarterly, how much would he have at the end of seven years?c. In comparing (a) and (b), what are the respective effective annual yields? (Hint: Consider the future value of each deposit after one year only.) Which alternative is better?
Jim makes a deposit of $12,000 in a bank account. The deposit is to earn interest compounded annually at the rate of 6 percent for seven years.a. How much will Jim have on deposit at the end of seven years? (Hint: What is future value?)b. Assuming the deposit earned a 9 percent rate of interest compounded quarterly, how much would he have at the end of seven years?c. In comparing (a) and (b), what are the respective effective annual yields? (Hint: Consider the future value of each deposit after one year only.) Which alternative is better?
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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Jim makes a deposit of $12,000 in a bank account. The deposit is to earn interest compounded annually at the rate of 6 percent for seven years.
a. How much will Jim have on deposit at the end of seven years? (Hint: What is
b. Assuming the deposit earned a 9 percent rate of interest compounded quarterly, how much would he have at the end of seven years?
c. In comparing (a) and (b), what are the respective effective annual yields? (Hint: Consider the future value of each deposit after one year only.) Which alternative is better?
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