Compa ing Rates: Example2 Example: Comparing Rates If you're a saver or a borrower, which one...
Your mother is trying to choose one of the following bank CDs to deposit $10,000. Which one will have the highest future value if she plans to invest for three years? (Assume a 365day year and use 4 decimal places.) Group of answer choices 3.44%, compounded daily 3.45%, compounded weekly 3.46%, compounded monthly 3.48%, compounded quarterly 3.50%, compounded annually.
21. You are about to deposit $139 into one of the following saving accounts to be left on deposit for 25 years, each bank offers an account with a different interest rate and compounding period. Assuming you want to maximize your wealth, how much money would be in the bank account that offers the best effective rate of return after 25 years? Bank A. 9.5 percent rate compounded semi annually Bank B. 9.4 percent rate compounded monthly Bank C. 9.3...
The banks in your area offer the following rates of interest on their savings accounts. If you want to open one of these accounts, which bank should you select? Bank A: 1.845 percent APR with daily compounding. Bank B: 1.840 percent APR with monthly compounding. Bank C: 1.875 percent APR with annual compounding. Bank D: 1.850 percent APR with quarterly compounding. Bank E: 1.875 percent APR with semi-annual compounding. A. Bank D B. Bank E C. Bank B D. Bank...
15. Comparing Mutually Exclusive Projects Hagar Industrial Systems Company (HISCE ing to decide between two different conveyor belt systems. System A costs $265,000. hasa 4-year life, and requires $73.000 in pretax annual operating costs. System B costs $380.000 has a 6-year life, and requires $64.000 in prelax annual operating costs. Both systems to be depreciated straight line to zero over their lives and will have zero salvage value Whichever system is chosen, it will not be replaced when it wears...
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You are about to deposit $671 into one of the following savings accounts to be left on deposit for 25 years. Each bank offers an account with a different interest rate and compounding period. Assuming you want to maximize your wealth, how much money would be in the bank account that offers the best effective rate of return after 25 years? BANK A: 9.5 percent rate compounded semi-annually BANK B: 9.4 percent rate compounded monthly BANK C:...
5. An investor would like to double their money. Their bank offers two interest rates. One rate will pay 9% interest compounded annually and one rate will pay 8.7% annually compounded continuously. Which one should you select and why? 6. A friend asks for a loan of money and offers to pay $20,000 at the end of 5 years. How much should you loan him now if you expect 15% interest per year on your loan?
Assume that you are nearing graduation and that you have applied for a job with a local bank. As part of the bank’s evaluation process, you have been asked to take an examination that covers several financial analysis techniques. The first section of the test addresses time value of money analysis. See how you would do by answering the following questions: a. Draw cash flow time lines for (1) a $100 lump-sum cash flow at the end of Year 2,...
-Which one of the following statements concerning interest rates is correct? A. Savers would prefer annual compounding over monthly compounding. B. The effective annual rate decreases as the number of compounding periods per year increases. C. The effective annual rate equals the annual percentage rate when interest is compounded annually. D. Borrowers would prefer monthly compounding over annual compounding. E. For any positive rate of interest, the effective annual rate will always exceed the annual percentage rate. -Nick got a...
Assignment (Time Value of Money) 1. What is the selling price today of a bond with a face value of $100,000,4% coupon paid annually and maturity of 10 years if market interest rates are: b. 6% c. 2% 2. In exchange for a $20,000 payment today, a well-known company will allow you to choose one of the alternatives shown in the following table, your opportunity cost is 11% Alternative Single Amount $28,000 at the end of 3 years $54,000 at...
4. It you invest $50,000 to earn 8 % interest , which of the following compounding approaches would return the highest amount after one year? a. Annually b. Quarterly c. Monthly d. Daily 5. Assume ABC Company deposits $20,000 with First National Bank in an account earning interest at 8% per annum, compounded quarterly. How much will ABC have in the account atter 3 years? (Use the factor tables provided at the end. Round answers to the nearest whole dollar.)...