Which of the following investments has the highest annual percentage yield (APY)? (Assume that all CDs are of equal risk.) Bank A that pays 8 percent interest compounded quarterly. Bank B that pays 8 percent compounded monthly. Bank C that pays 8.25 percent annually Show your working to justify your decision.

Which of the following investments has the highest annual percentage yield (APY)? (Assume that all CDs are of equal risk.) Bank A that pays 8 percent interest compounded quarterly. Bank B that pays 8 percent compounded monthly. Bank C that pays 8.25 percent annually Show your working to justify your decision.

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

See similar textbooks

Similar questions

An investor has the opportunity to make an investment that will provide an effective annual yield of 13.0 percent. She is considering two other investments of equal risk that will provide compound interest monthly and quarterly, respectively. Required: a. What must be the equivalent nominal annual rate (ENAR) for an investment that will provide compound interest monthly to ensure that an equivalent annual yield of 13.0 percent is earned?b. What must be the equivalent nominal annual rate (ENAR) for an investment that will provide compound interest quarterly to ensure that an equivalent annual yield of 13.0 percent is earned? Note: For all requirements, do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places. Please answer fast i give you upvote.
Suppose that ABSs are created from portfolios of subprime mortgages with the following allocation of the principal to tranches: senior 80%, mezzanine 10%, and equity 10%. (The portfolios of subprime mortgages have the same default rates.) An ABS CDO is then created from the mezzanine tranches with the same allocation of principal. Losses on the mortgage portfolio prove to be 16%. What, as a percent of tranche principal, are losses on the mezzanine tranche of the ABS CDO? (a)50% (b)60% c)80% (d)100%
Could you also include the formula that you use when working out the calculation, for example part A asks the new bond value, could you include a formula to show how this is calculated Consider a bank with the following balance sheet (M means million): Assets Value Duration of the Asset Convexity of the Asset 5yr bond bought at a yield of 3.4% (lending money) $550M 4.562 12.026 12yr bond bought at a yield of 4% (lending money) $800M 9.453 53.565 Liabilities Value Duration of the Liability Convexity of the Liability 2yr bond sold at a yield of 2.4% (borrowing money) $300M 1.941 2.384 4yr bond sold at a yield of 2.8% (borrowing money) $500M 3.759 8.206 Required a) If the interest rates go up by 1%, using the duration and convexity rule to determine the net worth of the bank and the equity to asset ratio; (Hint: equity to asset ratio = total equity/total asset) b) In a)’s scenario, to maintain the equity to asset…
Use Given-Required-Solution in answering problems. Provide cash flow diagram. Write answer on the space provided below. Solution shall be uploaded at the end of the quiz. A bond with a face value of P1,500,000 is sold at P1,400,000. If the bond matures in 5 years and pays 15 percent per annum, how much should the annual earning interest be? Round off to four decimal places in the final answer/s.
Assume you have the following asset and liability in your Balance Sheet:Asset - Bond AModified Duration = 2.6 yearsValue= RM1.5 millionLiability - Bond BModified Duration = 3.1 yearsValue= RM1.0 million duration gap is 0.53 years, net worth reduce by 8000. What should or could you to achieve immunized balance sheet?
Give typing answer with explanation and conclusion
Consider an FI with the following off-balance-sheet items: A two-year loan commitment with a face value of $120 million, a standby letter of credit with a face value of $20 million and trade-related letters of credit with a face value of $70 million. All counterparties have a credit rating of BBB. Assuming a required capital ratio of 8%, what is the capital amount the FI needs to hold against these exposures? ANSWER MUST BE 7.52 million
Suppose Federal National Mortgage Association sells mortgage-backed securities (MBS) backed by a fixed-rate mortgage portfolio having the following features: Current mortgage balance $300,000,000 Weighted average coupon rate (WAC) = 6% Weighted average maturity (WAM) = 360 months Current prepayment speed = 300 PSA %3D Pass-through rate (PT Rate) = 5.4% What is the amount of total cash flows that the investors of the agency MBS receive in Month 2? Oa. $1,948,883.93 O b. $1,948,915.93 O c. $1,798,915.93 O d. $2,098,659.47
Real and nominal interest rates: Suppose the real return on investing in amachine is 5% and the infation rate is 4%.(a) According to the Fisher equation, what should the nominal interest rate be?
Assume you have the following asset and liability in your Balance Sheet: Asset - Bond A Modified Duration = 2.6 years Value = RM1.5 million Liability - Bond B Modified Duration = 3.1 years Value = RM1.0 million a. Calculate the duration gap. b. What is the expected change in Net Worth if interest increases by 1%? Assume previous interest is 10% c. What should or could you to achieve immunised balance sheet? Note: Please show all workings.
1An annual percentage rate (APR) is determined by annualizing the rate using compound interest. Select one: True False 2The more frequent the compounding, the higher the future value, other things equal. Select one: True False 3Which statement is NOT true? a. Figure A correctly displays the relation between FVs of $1 investment at the interest rates 12.7% and 9.8%. b. Investment of $1 needs more than 7 years to double its value at the rate 9.8%, while only requiring less than 6 yeas to double at 12.7%. c. Figure B correctly displays the relation between PVs of $3 future value at the interest rates 12.7% and 9.8%. d. A discount factor for 5 years at 12.7% is lower than the discount factor for 5 years at 9.8%. 4After reading the fine print in your credit card agreement, you find that the "low" interest rate is actually an 17.05% APR, or 1.4208% per month. What is the effective annual rate? a. 18.45% b. 19.41% c. 18.82% d. 19.56% 5A zero-coupon bond is a bond that pay no…
Assume a bank has the following (very simplified) balance sheet. 1)Assets Mortgages Fixed rate, 15 year, annual payments, both the coupon rate and yield-to-maturity are 8% Floating rate, 15 year, rate: LIBOR + 2%, (duration = 0) 2)Liabilities Overnight deposits, rate: 0.6%, (duration = 0) 2 year CD, rate: 2%, assume it is a zero coupon 3 year CD, rate: 4%, assume it is a zero coupon 3) Assignment: Calculate weights which will immunize the portfolio. Note this is a set of weights, there is not one unique solution. You don't have to calculate the full set, just some set of weights which immunizes the portfolio. Now say you can only invest 50% of your assets in floating rate mortgages. What is the minimum amount of interest rate risk you can have? What will happen to the value of your portfolio if interest rates increase by 1%?

SEE MORE QUESTIONS

Recommended textbooks for you

Essentials Of Investments

Finance

ISBN:

9781260013924

Author:

Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:

Mcgraw-hill Education,

FUNDAMENTALS OF CORPORATE FINANCE

Finance

ISBN:

9781260013962

Author:

BREALEY

Publisher:

RENT MCG

Financial Management: Theory & Practice

Finance

ISBN:

9781337909730

Author:

Brigham

Publisher:

Cengage

Foundations Of Finance

Finance

ISBN:

9780134897264

Author:

KEOWN, Arthur J., Martin, John D., PETTY, J. William

Publisher:

Pearson,

Fundamentals of Financial Management (MindTap Cou…

Finance

ISBN:

9781337395250

Author:

Eugene F. Brigham, Joel F. Houston

Publisher:

Cengage Learning

Corporate Finance (The Mcgraw-hill/Irwin Series i…

Finance

ISBN:

9780077861759

Author:

Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor

Publisher:

McGraw-Hill Education

Essentials Of Investments

Finance

ISBN:

9781260013924

Author:

Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:

Mcgraw-hill Education,

FUNDAMENTALS OF CORPORATE FINANCE

Finance

ISBN:

9781260013962

Author:

BREALEY

Publisher:

RENT MCG

Financial Management: Theory & Practice

Finance

ISBN:

9781337909730

Author:

Brigham

Publisher:

Cengage

Foundations Of Finance

Finance

ISBN:

9780134897264

Author:

KEOWN, Arthur J., Martin, John D., PETTY, J. William

Publisher:

Pearson,

Fundamentals of Financial Management (MindTap Cou…

Finance

ISBN:

9781337395250

Author:

Eugene F. Brigham, Joel F. Houston

Publisher:

Cengage Learning

Corporate Finance (The Mcgraw-hill/Irwin Series i…

Finance

ISBN:

9780077861759

Author:

Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor

Publisher:

McGraw-Hill Education

SEE MORE TEXTBOOKS