a)
The future value of investment is found using the following equation
Future value = Present value
( 1 + interest rate)n
FV = $ 1
( 1 + 0.05)3 = $ 1.15763
If $ 1 is deposited into an account that pays 5% per year for 3 years, the account will have $ 1.15763
FV = $ 1
( 1 + 0.025)6 = $ 1.15969
If $ 1 is deposited into an account that pays 2.5% every six month for 3 years, the amount in the account after 3 years equals $ 1.15969
Therefore it is prefer " An account that pays 2.5% every six months for three years"
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b)
When the interest rate is compounded once in 18 months , it means it is compounded twice in three years
FV = $ 1
( 1 + 0.075 )2 = 1.15563
If the account pays 7.5% every 18 months for three years, the amount in the account after three years is $ 1.15563
Therefore you will prefer " An account that pays 5% per year"
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c)
FV = $ 1
( 1 + 0.005)12 X 3 = $ 1.19668
If the account pays 0.5% every month for three years, the amount in the account after three years is $ 1.19668
Therefore you will prefer " An account that pays 0.5% per month for three years"
12 of 14 (9 complete) Which do you prefer a bank account that pays 5% per...
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? If you deposit $1 into a bank account that pays 10% per year for three years,...
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...
Which do you prefer: a bank account that pays 5.7% per year (EAR) for three years or a. An account that pays 2.6 % every six months for three years? b. An account that pays 7.2% every 18 months for three years? c. An account that pays 0.28% per month for three years? (Note: Compare your current bank EAR with each of the three alternative accounts. Be careful not to round any intermediate steps less than six decimal places.) ...
Which do you prefer: a bank account that pays 5.7% per year (EAR) for three years or a. An account that pays 2.2% every six months for three years? b. An account that pays 7.1% every 18 months for three years? c. An account that pays 0.42% per month for three years? (Note: Compare your current bank EAR with each of the three alternative accounts. Be careful not to round any intermediate steps less than six decimal places.)
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a. You deposit $1,800 in your bank account. If the bank pays 5% simple Interest, how much will you accumulate in your account after 8 years? Future value b. What if the bank pays compound Interest (annually? (Do not round Intermediate calculations. Round your answer to 2 decimal places) Compound Interest c. How much of your earnings will be interest on Interest? (Round your answer to 2 decimal places.) Interest on Interest
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Suppose you currently have $5,000 in your savings account, and your bank pays interest at a rate of 0.5% per month. If you n how much will you have in the account in 5 years? In 5 years' time, you will have $ in the account. (Round to the nearest cent.)