Economics: Private and Public Choice
16th Edition
ISBN: 9781337642224
Author: James D. Gwartney; Richard L. Stroup; Russell S. Sobel
Publisher: Cengage Learning US
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Question
Chapter 27, Problem 4CQ
To determine
Effective interest rate.
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Suppose that you saved $4,700 at the beginning of the year and that at the end of the year your savings account has $6,100 in it. What interest rate did you earn?
can you solve it with formulas?please make your text readable.
You are going to invest $1,500 today in a
fund today.
After 10 years, you want to have exactly
$2,500 in the fund.
If the interest rate is compounded
annually, what interest rate is needed to
achieve this?
Chapter 27 Solutions
Economics: Private and Public Choice
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- A bank pays one percent interest on savings account four times a year. What is the actual annual interest rate?arrow_forwardSuppose Alice decides to put some money in a new account that compounds twice per year. At the beginning of the year, before the first compounding, she deposits $10,000. At the end of the year, she finds $11,000 in the account. What was the interest rate on this account?arrow_forwardGive typing answer to all parts?arrow_forward
- Is it possible for a one-year coupon bond to have a negative nominal interest rate? Explain, how?arrow_forwardSuppose a bond pays annual interest of $50. Compute the interest rate per year that a bondholder can earn for each face value in the following table. Face Value Interest Rate per Year (Dollars) 200 500 1,000 (Percentage) If the annual interest paid stays the same and the face value of the bond goes up, then the interest rate paid for the bond per yeararrow_forwardAngela puts $5,000 in a savings account that pays 5 percent per year. The future value of her money one year from now is $ As the interest rate (Enter your response as a whole number.) the future value of Angela's $5,000 savings will increase.arrow_forward
- How to find the effective interest rate of a bond?arrow_forwardThe central bank is selling $100 worth of bonds payable in one year. The price it gets today is $98. What is the implicit interest rate? (If you get 0.0112, please write 1.12)arrow_forwardSam promises to pay Sandy $2,000 in four years and another $3,000 four years later for a loan of $2,000 from Sandy today. What is the interest rate that Sandy is getting? Assume interest is compounded monthly.arrow_forward
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