ont 23) A two-year certificate of deposit pays an annual effective rate of 8.25%. The purcnaser is offered two options for prepayment penalties in the event of early withdrawal: A) A reduction in the rate of interest to 6.25%; B) Loss of three months interest. In order to assist the purchaser in deciding which option to select, compute the ratio of the proceeds under Option A to those under Option B if the certificate of deposit is surrendered: a) At the end of 7 months. ANSWER = b) At the end of 18 months. ANSWER =

ont 23) A two-year certificate of deposit pays an annual effective rate of 8.25%. The purcnaser is offered two options for prepayment penalties in the event of early withdrawal: A) A reduction in the rate of interest to 6.25%; B) Loss of three months interest. In order to assist the purchaser in deciding which option to select, compute the ratio of the proceeds under Option A to those under Option B if the certificate of deposit is surrendered: a) At the end of 7 months. ANSWER = b) At the end of 18 months. ANSWER =

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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A borrower has the option of accepting a fixed rate loan for five years at 10% or a floating rate loan of LIBOR plus 3%. Assume the current LIBOR rate is 6%. If the floating rate loan was chosen, did the borrower make the right decision if the LIBOR rates at the beginning of the next four years are 6.5%, 7.0%, 7.5%, and 7.75%? Note that the LIBOR rate at the beginning of the year is used to determine the payment at the end of the year.
Adams Acrobats lent $17,147 to Donaldson, Inc., accepting Donaldson's 2-year, $20,000, zero-interest-bearing note. The implied interest rate is 8%. Prepare Adams's journal entries for the initial transaction, recognition of interest each year, and the collection of $20,000 at maturity. (Round answers to O decimal places, e.g. 5,275. If no entry is required, select "No Entry" for the account titles and enter O for the amounts. Credit account titles are automatically indented when the amount is entered. Do not indent manually. List all debit entries before credit entries.) Account Titles and Explanation (To record the initial transations) (To record the recognition of interest in year one) (To recognize the interest in year 2) (To record the collection of the note) Debit Credit INT
On May 3, 2020, Leven Corporation negotiated a short-term loan of $645,000. The loan is due October 1, 2020, and carries a 5.30% interest rate. Use ordinary interest to calculate the interest. What is the total amount Leven would pay on the maturity date? (Use Days in a year table.) Note: Do not round intermediate calculations. Round your answer to the nearest cent. Maturity value
Max Corp. sold goods for $36,000 on July 17, 2020, and accepted a 12%, 90-day note. On August 1, the note was sold to a bank at a 15% discount rate. Required: a. Compute the proceeds. Assume a 360-day year. b. If the maker dishonored the note at maturity, prepare the entry for Max Corp. assuming $75 of bank protest fees. If an amount box does not require an entry, leave it blank.
On May 3, 2020, Leven Corporation negotiated a short-term loan of $870,000. The loan is due October 1, 2020, and carries a 6.80% interest rate. Use ordinary interest to calculate the interest. What is the total amount Leven would pay on the maturity date? (Use Days in a year table.) Note: Do not round intermediate calculations. Round your answer to the nearest cent. Maturity value:
Tony Acrobats lent $44,639 to Donaldson, Inc., accepting Donaldson's 2-year, $55,000, zero-interest-bearing note. The implied interest rate is 11%. Prepare Tony's journal entries for the initial transaction, recognition of interest each year, and the collection of $55,000 at maturity. (Round answers to O decimal places, e.g. 5,275. If no entry is required, select "No Entry" for the account titles and enter O for the amounts. Credit account titles are automatically indented when the amount is entered. Do not indent manually. List all debit entries before credit entries.) Account Titles and Explanation (To record the initial transations) (To record the recognition of interest in year one) Debit I Credit
You deposit s, 100 in a 2-year certificate of deposit (CD) earning 2.2% annual interest compounded daily. At the end of the 2 years, you reinvest the compound amount plus an additional $8,100 In another 2-year CD. The annual interest rate on the second CD is 2.8%, compounded daily. What is the compound amount when the second CD matures? (Assume all years have 365 days. Round your answer to the nearest cent.) 2. Need Help? Read R
A borrower has two alternatives for a loan: (1) issue a $360,000, 60-day, 5% note or (2) issue a $360,000, 60-day note that the creditor discounts at 5%. a. Compute the amount of the interest expense for each option. b. Determine the proceeds received by the borrower in each situation. c. Which alternative is more favorable to the borrower? Explain.
Hh.169.
The following assumptions are made for each Investigation: The original mortgage is $300,000 amortized over 25 years at 3.99% compounded semi- annually Unless otherwise indicated, assume monthly payments are made. Unless otherwise indicated, assume the interest rate remains constant during the amortization period. Your answers can be entered directly on this assignment, but please hand in all rough work as well. Investigation 1: Shortening the Payment Period Most lending institutions allow mortgage payments to be made monthly, bi-monthly (twice a month) or weekly. Most even allow "accelerated" weekly mortgage payments. With this option, the weekly payment is calculated as a monthly payment divided by 4. 1. (a) Complete this table for the mortgage defined above. The equivalent interest rate of interest for each compounding period has been calculated for you (as discussed in section 6.4 in your text). The Interest saved is the difference between the Total interest paid for monthly…

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