You deposit $1,000 at the end of the year (k = 0) into an account that pays interest at a rate of 6% compounded annually. Two years after your deposit, the savings account interest rate changes to 12% nominal interest compounded monthly. Six years after your deposit, the savings account again changes its interest rate; this time the interest rate becomes 8% nominal interest compounded quarterly. Nine years after your deposit, the saving account changes its rate once more to 5% compounded annually. a. How much money should be in the savings account 18 years after the initial deposit, assuming no further changes in the account's interest rate? b. What interest rate, compounded annually, is equivalent to the interest pattern of the saving account in Part (a) over the entire 18 year period? should be in the savings account 18 years after the initial deposit. (Round to the nearest dollar.) b. The interest rate equivalent to the interest pattern of the saving account in Part (a) over the entire 18 year period is (Round to one decimal place.) a. % per year.

You deposit $1,000 at the end of the year (k = 0) into an account that pays interest at a rate of 6% compounded annually. Two years after your deposit, the savings account interest rate changes to 12% nominal interest compounded monthly. Six years after your deposit, the savings account again changes its interest rate; this time the interest rate becomes 8% nominal interest compounded quarterly. Nine years after your deposit, the saving account changes its rate once more to 5% compounded annually. a. How much money should be in the savings account 18 years after the initial deposit, assuming no further changes in the account's interest rate? b. What interest rate, compounded annually, is equivalent to the interest pattern of the saving account in Part (a) over the entire 18 year period? should be in the savings account 18 years after the initial deposit. (Round to the nearest dollar.) b. The interest rate equivalent to the interest pattern of the saving account in Part (a) over the entire 18 year period is (Round to one decimal place.) a. % per year.

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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You deposit $2,000 at the end of the year (k = 0) into an account that pays interest at a rate of 6% compounded annually. A year after your deposit, the savings account interest rate changes to 12% nominal interest compounded monthly. Five years after your deposit, the savings account again changes its interest rate; this time the interest rate becomes 8% nominal interest compounded quarterly. Nine years after your deposit, the saving account changes its rate once more to 5% compounded annually. a. How much money should be in the savings account 17 years after the initial deposit, assuming no further changes in the account's interest rate? b. What interest rate, compounded annually, is equivalent to the interest pattern of the saving account in Part (a) over the entire 17 year period?

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