You deposit $1,500 at the end of the year (k = 0) into an account that pays interest at a rate of 7% compounded annually. A year 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. Eight years after your deposit, the saving account changes its rate once more to 6% 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 18years 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 % per year. (Round to one decimal place.)
You deposit $1,500 at the end of the year (k = 0) into an account that pays interest at a rate of 7% compounded annually. A year 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. Eight years after your deposit, the saving account changes its rate once more to 6% 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 18years 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 % per year. (Round to one decimal place.)
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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Transcribed Image Text:You deposit $1,500 at the end of the year (k = 0) into an account that pays interest at a rate of 7% compounded annually.
A year 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. Eight years after your deposit, the saving account changes its rate once more to
6% 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?
a. $ should be in the savings account 18years 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
% per year. (Round to one decimal place.)
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