Joan has savings of $12,000 on June 1. Since she may need some of the money during the next three months, she is considering two options at her bank. (1) An Investment Builder account earns a 2.25% rate of interest. The interest is calculated on the daily closing balance and paid on the first day of the following month. (2) A 90-to 179-day cashable term deposit earns a rate of 2.8%, paid at maturity. If interest rates do not change and Joan does not withdraw any of the funds, how much more will she earn from the term deposit option up to September 1? (Keep in mind that savings account interest paid on the first day of the month will itself earn interest during the subsequent month.)
Joan has savings of $12,000 on June 1. Since she may need some of the money during the next three months, she is considering two options at her bank. (1) An Investment Builder account earns a 2.25% rate of interest. The interest is calculated on the daily closing balance and paid on the first day of the following month. (2) A 90-to 179-day cashable term deposit earns a rate of 2.8%, paid at maturity. If interest rates do not change and Joan does not withdraw any of the funds, how much more will she earn from the term deposit option up to September 1? (Keep in mind that savings account interest paid on the first day of the month will itself earn interest during the subsequent month.)
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:Joan has savings of $12,000 on June 1. Since she may need some of the money during the next three months, she is considering
two options at her bank. (1) An Investment Builder account earns a 2.25% rate of interest. The interest is calculated on the daily
closing balance and paid on the first day of the following month. (2) A 90-to 179-day cashable term deposit earns a rate of 2.8%,
paid at maturity. If interest rates do not change and Joan does not withdraw any of the funds, how much more will she earn from
the term deposit option up to September 1? (Keep in mind that savings account interest paid on the first day of the month will
itself earn interest during the subsequent month.)
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