Question

Which do you prefer: a bank account that pays 10% per year (EAR) for three years or a. An account that pays 5% every six months for three years? b. An account that pays 15% every 18 months for three years? c. An account that pays 1% per month for three years? a. An account that pays 5% every six months for three years? . (Round to five If you deposit $1 into a bank account that pays 10% per year for three years, you will have $ decimal places.) If you deposit $1 into a bank account that pays 5% every six months for three years, the amount you will receive after three years is $ (Round to five decimal places.) Therefore, you will prefer: S (Select from the drop-down menu.) 1. Select om te b. An account that pays 15% every 18 months for three years? 5 . If the account pays 15% every 18 months for three years, the amount you will receive after three years is $ (Round to five decimal places.) Therefore, you will prefer: V. (Select from the drop-down menu.) c. An account that pays 1% per month for three l. (Round to If the account pays 1% every month for three years, the amount you will receive after three years is s five decimal places.) Therefore, you will prefer: (Select from the drop-down menu.) Enter your answer in each of the answer boxes. 14 unamıyou B. Tihamiyou . University of Orego... 189 di A w P3 x]

Answer 1

a.

deposit in 3 years with 10% EAR=1*(1+10%)^3=1.33100

deposit in 3 years with 5% every six months=1*(1+5%)^6=1.34010

Therefore you will prefer an account that pays 5% every six months for three years.

b.

deposit in 3 years with 15% every 18 months=1*(1+15%)^2=1.32250

Therefore you will prefer an account that pays 10% per year (EAR)

c.

deposit in 3 years with 1% every month

=1*(1+1%)^36

=1.43077

Therefore you will prefer an account that pays 1% per month for three years

the above is answer..