**Comparing Bank Account Options:**Consider the following bank account options that offer different interest rates over three years:a. An account with a 2.5% interest rate every six months.b. An account with a 7.5% interest rate every 18 months.c. An account with a 0.50% interest rate per month.**Note:** Compare your current bank account's Effective Annual Rate (EAR) with each of the three options. Ensure accuracy by not rounding any intermediate calculations to less than six decimal places.---**Example Calculation:**If you deposit $1 into a bank account that offers a 5.0% EAR per year for three years, calculate the amount you will receive after three years. Round your answer to five decimal places.

Given, 5% per year for 3 years Amount is $1

Which do you prefer: a bank account that pays 5.0% per year (EAR) for three years or a. An account that pays 2.5% every six months for three years? b. An account that pays 7.5% every 18 months for three years? c. An account that pays 0.50% per month for three years? (Note: Compare your current bank EAR with each of the three alternative accounts. Be careful not to round any intermediate steps less than six decimal places.)

Which do you prefer: a bank account that pays 5.0% per year (EAR) for three years or a. An account that pays 2.5% every six months for three years? b. An account that pays 7.5% every 18 months for three years? c. An account that pays 0.50% per month for three years? (Note: Compare your current bank EAR with each of the three alternative accounts. Be careful not to round any intermediate steps less than six decimal places.)

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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3. Subject : - Finanace assume you currently have a chase sapphire preferred card with a balance of 12,000 dollars. Behind the honest sort, suppose you resolve to pay off the credit card in five years and the stated APr charged by the credit card company the credit card is 19.00%. How much would your monthy payments have to be to reach your goal?
Suppose you have $8,675,309 to deposit into a savings account for one year. The bank lets you choose whether you want 12% compounded annually interest, or 12% compounded monthly interest. Is 12% given annually the same thing as 1% given monthly? Why or why not?
You want to open a savings account and you have 3 choices: 1) a saving account that pays interest of 7.2% compounded quarterly (In other words, it offers an APR=7.2%, compounded quarterly), 2) a saving account that pays interest of 6.8% compounded monthly, and 3) a saving account that pays interest of 7% continuously compounded? Which one do you prefer?
Bank A pays 3% interest compounded annually on deposits, while Bank B pays 2.25% compounded daily. a. Based on the EAR (or EFF%), which bank should you use? I. You would choose Bank A because its EAR is higher. II. You would choose Bank B because its EAR is higher. III. You would choose Bank A because its nominal interest rate is higher. IV. You would choose Bank B because its nominal interest rate is higher. V. You are indifferent between the banks and your decision will be based upon which one offers you a gift for opening an account. -Select- v b. Could your choice of banks be influenced by the fact that you might want to withdraw your funds during the year as opposed to at the end of the year? Assume that your funds must be left on deposit during an entire compounding period in order to receive any interest. I. If funds must be left on deposit until the end of the compounding period (1 year for Bank A and 1 day for Bank B), and you think there is a high probability that you will…
Please solve very soon completely
You borrow $1,000 from a bank at 6% annual interest and promise to pay it back after a year. As you sign the loan documents, both you and the bank expect inflation to be 3% in the coming year. During the course of the year, however, the average price level rises by only 1%. What best describes this situation? Select one: a. Both you and the bank are better off because the inflation rate is less than the nominal interest rate but greater than zero. O b. The bank has gained at your expense because the real interest rate on the loan is higher than expected. c. Neither you nor the bank has gained anything extra because the inflation rate is less than the nominal interest rate. O d. You have gained at the bank's expense because you can pay the bank back in inflated dollars.
One can solve for payments (PMT), periods (N), and interest rates (1) for annuities. The easiest way to solve for these variables is with a financial calculator or a spreadsheet. Quantitative Problem 1: You plan to deposit $2,100 per year for 4 years into a money market account with an annual return of 3%. You plan to make your first deposit one year from today. a. What amount will be in your account at the end of 4 years? Do not round intermediate calculations. Round your answer to the nearest cent. $ b. Assume that your deposits will begin today. What amount will be in your account after 4 years? Do not round intermediate calculations. Round your answer to the nearest cent. $ Quantitative Problem 2: You and your wife are making plans for retirement. You plan on living 25 years after you retire and would like to have $95,000 annually on which to live. Your first withdrawal will be made one year after you retire and you anticipate that your retirement account will earn 12% annually. a.…
A consumer loan requires monthly payments, in equal amounts, $700.00. The next payment is due in one month. Assume that the appropriate discount rate is 21% (APR). What is the effective annual rate? (show them in excel spreadsheet, write your own present value formulas, don't use Excel built-in functions.
You can earn .53 percent per month at your bank. If you deposit $3,600, how long must you wait until your account has grown to $6,600? Note: Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16. Number of months
If you earn 5% per year on your bank account, how long will it take an account with $110 to double to $220? (Do not round intermediate calculations. Round your answer to 2 decimal places.)
A commercial bank offers you a credit card with an annual percentage rate APR = 9%, compounding monthly. What’s the credit card’s nominal annual rate?
Solve the problem below. 2. Suppose that your bank has a minimum loan charge of $48 when you borrow at 6% ordinary interest for 90 days. What principal borrowed will result in a $48 interest charge?

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