Financial accounting question Your bank has two checking account options, one pays tax-free interest at arate of 2% per annum and the other pays taxable interest at a rate of 3% perannum. You are currently in a 25% marginal tax bracket. If you converted thetax-free interest rate to the comparable taxable interest rate, you would findthat:A. The comparable taxable rate is 2.667%, thus you would select the taxableaccount.B. The comparable taxable rate is 2.35%, thus you would select the taxableaccount.C. The comparable taxable rate is 3.53%, thus you would select the tax-freeaccount.D. You would always select the account bearing the highest interest rate.

Step 1: Define Checking AccountA checking account is a common type of bank account for depositing…

Answered: Your bank has two checking account…

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter5: The Time Value Of Money

Section: Chapter Questions

Problem 4QTD

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Subject is general account
General accounting
Use these assumptions. Inflation is 5%. The Rod Serling bank pays 4.5% interest on checking compounded monthly, and 6% interest on savings compounded annually. You are in the 22% marginal tax bracket. Use equations 5.2 through 5.5 on page 98 & 99. A) What is the APY for checking accounts at the Rod Serling bank? B) What is the RAPY for savings accounts at the Rod Serling bank? C) Suppose I own a gas station that has assets worth $250,000, and owes $100,000 on a bank loan and has 10,000 shares of stock outstanding. Based on these factors alone, what is a rational price per share? (Use equation 6.1) D) Use Equation 6.2 to answer the following. For my gas station that has 10,000 shares sold to random investors, suppose I promise to pay $1 annual dividend and the prevailing market interest rate is 5%. What would be the rational market price for my stock based entirely on these factors?
Suppose that you want to take out a loan and that your local bank wants to charge you an annual real interest rate equal to 3%. Assuming that the annualized expected rate of inflation over the life of the loan is 1%, determine the nominal interest rate that the bank will charge you. What was the actual real interest rate on the loan if, over the life of the loan, actual inflation is 0.5%?
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Which do you prefer: a bank account that pays 10% per year (EAR) for 3 years or a. An account that pays 5.0% every 6 months for 3 years? b. An account that pays 15.0% every 18 months for 3 years? c. An account that pays 1.0% per month for 3 years? a. An account that pays 5.0% every 6 months for 3 years? If you deposit $1 into a bank account that pays 10% per year for 3 years, the amount you will receive after 3 years is $ If you deposit $1 into a bank account that pays 5.0% every 6 months for 3 years, the amount you will receive after 3 years is $ (Select from the drop-down menu.) (Round to five decimal places.) Therefore, you will prefer b. An account that pays 15.0% every 18 months for 3 years? If you deposit $1 into a bank account that pays 15.0% every 18 months for 3 years, the amount you will receive after 3 years is $ Therefore, you will prefer (Select from the drop-down menu.) c. An account that pays 1.0% per month for 3 years? If you deposit $1 into a bank account that pays…
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answer
Suppose you want to borrow $90,000 and you find a bank offering a 20-year loan with an APR of 5%. a. Find your regular payments if you pay n = 1, 12, 26, 52 times a year. b. Compute the total payout for each of the loans in part (a). c. Compare the total payouts computed in part (b). a. The payment for n = 1 would be $ The payment for n = 12 would be $ The payment for n = 26 would be $ The payment for n= 52 would be $ (Do not round until the final answer. Then round to the nearest cent as needed.)

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