Suppose that Bank A pays 1.89% interest compounded quarterly on a 5-year CD, while Bank B pays 1.88% compounded daily. a. What are the effective rates for the two CDs? Use a 365-day year. b. Suppose $4000 was invested in each of these accounts. Find the compound amount after five years for each account. a. The effective rate for Bank A is %. (Do not round until the final answer. Then round to three decimal places as needed.)

Suppose that Bank A pays 1.89% interest compounded quarterly on a 5-year CD, while Bank B pays 1.88% compounded daily. a. What are the effective rates for the two CDs? Use a 365-day year. b. Suppose $4000 was invested in each of these accounts. Find the compound amount after five years for each account. a. The effective rate for Bank A is %. (Do not round until the final answer. Then round to three decimal places as needed.)

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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The Continental Bank advertises capital savings at 6.1% compounded annually while TD Canada Trust offers premium savings at 5.9% compounded monthly Suppose you have $2500 to invest for two years. (a) Which deposit will earn more interest? - (b) What is the difference in the amount of interest? CD (a) The (b) The difference is $ (Round the final answer to the nearest cent as needed. Round all intermediate values to six decimal places as needed) savings account will earn more interest
You are considering three alternative investments: a). A three-year bank CD paying 7.84 percent compounded quarterly. Calculate effective annual interest rate (EAR)? (Round answer to 2 decimal places, e.g. 15.25%.) effective annual rate ________% b. A three-year bank CD paying 7.64 percent compounded monthly. Calculate effective annual interest rate (EAR)? (Round answer to 2 decimal places, e.g. 15.25%.) Effective annual rate ________% c). A three-year bank CD paying 8.14 percent compounded annually. Calculate effective annual interest rate (EAR)? (Round answer to 2 decimal places, e.g. 15.25%.) Effective annual rate _____% d). Which of the above investments has the highest effective annual interest rate (EAR)? The three-year bank CD paying which option has the highest effective yield? Is it 7.84 percent interest compounded quarterly? or 8.14 percent interest compounded annually or 7.64 percent interest compounded monthly
Your company plans to borrow $5 million for 12 months, and your banker gives you a stated rate of 14 percent interest. Calculate the effective rate of interest for the following types of loans. a. Simple 14 percent interest with a compensating balance of 10 percent. (Use a 360-day year. Input your answer as a percent rounded to 2 decimal places.) b. Discounted interest (with no compensating balance). (Input your answer as percent rounded to 2 decimal places.) c. An installment loan (12 payments). (Input your answer as a percent rounded to 2 decimal places.) d. Discounted interest with a compensating balance of 5 percent. (Use a 360-day year. Input your answer as a percent rounded to 2 decimal places.)
Suppose you borrowed $10, 000 at an interest rate of 12% compounded monthly over 48 months. At the end of the first year (after 12 payments), you want to negotiate with the bank to pay off the remainder of the loan in 12 equal quarterly payments. What quarterly payment must be made if the nominal interest rate (12%) and compounding frequency (monthly) remain the same?
Suppose that $30,000 is invested at 9% interest. Find the amount of money in the account after 7 years if the interest is compounded annually. If interest is compounded annually, what is the amount of money after t = 7 years? $ (Do not round until the final answer. Then round to the nearest cent as needed.)
Suppose an individual makes an initial investment of $1,400 in an account that earns 7.0%, compounded monthly, and makes additional contributions of $100 at the end of each month for a period of 12 years. After these 12 years, this individual wants to make withdrawals at the end of each month for the next 5 years (so that the account balance will be reduced to 50). (Round your answers to the nearest cent) (a) How much is in the account after the last deposit is made? (b) How much was deposited? 1 (e) What is the amount of each withdrawal? (0) What is the total amount withdrawn? - 3 Need Help?
Suppose an individual makes an initial investment of $1,400 in an account that earns 8.4%, compounded monthly, and makes additional contributions of $100 at the end of each month for a period of 12 years. After these 12 years, this individual wants to make withdrawals at the end of each month for the next 5 years (so that the account balance will be reduced to $0). (Round your answers to the nearest cent.) (a) How much is in the account after the last deposit is made? $ (b) How much was deposited? $ (c) What is the amount of each withdrawal? $ (d) What is the total amount withdrawn? $
Presently the Smiths invest $100,000 for A months in a certificate paying interest at the nominal rate of 6% compounded monthly. How much will they have at the end? We have A=117 Round your answer to the first decimal. (for instance, 43.232 gives 43.23, 124.756 gives 124.76). The decimal separator is a point.
Teal and Associates needs to borrow $65,000. The best loan they can find is one at 12% that must be repaid in monthly installments over the next 5 1/2 1 2 years. How much are the monthly payments? (a) State the type. A. ordinary annuityB.sinking fund C.present valueD.amortizationE.future value (b) Answer the question. (Round your answer to the nearest cent.)
Suppose you borrowed $ 15 000 at 8% monthly interest to repay it in monthly installments over 4 years. At the end of the first year (after 12 payments), you want to negotiate with the bank to pay off the remainder of the loan as in the following plan: The next payment will be made in the sixth month of the 2nd year in the amount G and will continue to increase linearly in the amount G every 3 months. Then what is G?
Suppose you decide to deposit $18,000 in a savings account that pays a nominal rate of 6%, but interest is compounded daily. Based on a 365-day year, how much would you have in the account after nine months? (Hint: To calculate the number of days, divide the number of months by 12 and multiply by 365.) $18,263.73 $18,828.59 $19,205.16 $19,581.73
Suppose that $2500 is placed in a savings account at an annual rate of 4.2%, compounded monthly. Assuming that no withdrawals are made, how long will it take for the account to grow to $4000? Do not round any intermediate computations, and round your answer to the nearest hundredth. I necessary, refer to the list.of finandial formulas O ears

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