Melissa visits two competing banks. National Bank and Trust is offering a 5 year CD with an annual interest rate of 3.75%. This account will compound monthly (12 times per year). Jones Town Bank is offering a 5 year CD with an annual interest rate of 3%. This account will also compound monthly (12 times per year). The Jones Town Savings and Loan is offering a $300 bonus to all new customers. This bonus money will be deposited in Melissa’s account on the first day of her account being opened. Assuming Melissa has $10,000 to invest, which bank should she choose? If her investment amount changed to $5000, how would this affect her decision?

Melissa visits two competing banks. National Bank and Trust is offering a 5 year CD with an annual interest rate of 3.75%. This account will compound monthly (12 times per year). Jones Town Bank is offering a 5 year CD with an annual interest rate of 3%. This account will also compound monthly (12 times per year). The Jones Town Savings and Loan is offering a $300 bonus to all new customers. This bonus money will be deposited in Melissa’s account on the first day of her account being opened. Assuming Melissa has $10,000 to invest, which bank should she choose? If her investment amount changed to $5000, how would this affect her decision?

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter19: Capital Investment

Section: Chapter Questions

Problem 8E

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Concept explainers

Cost of Credit

The cost of credit is an extra amount that the borrower has to pay besides the loan amount. These credit charges may vary from loan to loan. The cost of credit includes interest charges, maintenance charges, and arrangement charges. Some of the costs are mandatorily collected by the lender based on the loan amount and tenure of the loan. The cost of credit is also called finance charges of the credit.

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