Ottawa-INVEST is offering an investment that pays an APR of 5% with continuous compounding. What is the effective annual rate of return provided by this investment?
Question 23 options:
5.50% |
|
4.12% |
|
5.13% |
|
5.00% |
|
Not enough information. |
APR = 5% with continuous compounding
EAR = e^APR -1
Effective Annual Rate of return = e^APR -1 = e ^ 5% -1 = 5.13%
Answer is 5.13%
Ottawa-INVEST is offering an investment that pays an APR of 5% with continuous compounding. What is...
Ottawa-INVEST is offering an investment that pays an APR of 5% with continuous compounding. What is the effective annual rate of return provided by this investment? Question 28 options: 5.13% 5.50% 5.00% Not enough information. 4.12%
Ottawa-INVEST is offering an investment that pays an APR of 5% with continuous compounding. What is the effective annual rate of return provided by this investment? 5.00% 5.13% 5.50% 4.12% Not enough information.
Ottawa-INVEST is offering an investment that pays an APR of 5% with continuous compounding. What is the effective annual rate of return provided by this investment? Not enough information. 04.12% 5.00% 5.13% 5.50%
3. Nonannual compounding period The number of compounding periods in one year is called compounding frequency. The compounding frequency affects both the present and future values of cash flows An investor can invest money with a particular bank and earn a stated interest rate of 13.20%; however, interest will be compounded quarterly. What are the nominal, periodic, and effective interest rates for this investment opportunity? Interest Rates Nominal rate Periodic rate Effective annual rate You want to invest $19,000 and...
For nominal interest rate of compounding is continuous. Show your solution 3. %, effective annual interest rate will be 12% when 4. Under what conditions APR will be different from EAR? L. Shark is designing a new account that pays interest quarterly. They wish to pay effectively, a 16% per year on this account. L. Shark desires to advertise the annual percentage rate on this new account (and not the effective rate, since their competitors state their interest on an...
For nominal interest rate of compounding is continuous. Show your solution 3. %, effective annual interest rate will be 12% when 4. Under what conditions APR will be different from EAR? L. Shark is designing a new account that pays interest quarterly. They wish to pay effectively, a 16% per year on this account. L. Shark desires to advertise the annual percentage rate on this new account (and not the effective rate, since their competitors state their interest on an...
Suppose that you invest in a two-year Treasury bond with a coupon rate of 6% and $1,000 par. Suppose that you buy this bond at a price of exactly $1,000. You intend to hold this bond to maturity and reinvest the coupons until the bond matures. You expect to reinvest the coupons in an account that pays an APR of 2.83%, with semi-annual compounding. What is the effective annual rate of return on your investment?
12. Compound interest. You invest $1000 in an account that pays 5% compounded annually. What is the balance after two years? 13. Compounding using different periods. You invest $2000 in an account that pays an APR of 6%. a. What is the value of the investment after three years if interest is compounded yearly? Round your
22/23 An investor contributes $528.00 per quarter in an account that pays 5.28% APR with quarterly compounding. The first contribution will be made next quarter. What is the future value of this account in 5.00 years? Submit Answer format: Currency: Round to: 2 decimal places. A lender offers you a mortgage with an APR of 5.04% with monthly compounding. What is the effective rate of interest charged by the lender? Submit Answer format: Percentage Round to: 2 decimal places (Example:...
8. An investor has the choice to compound an investment with a stated 5% annual return either: annually, quarterly, or continuously. The effective annual rate (EAR) is highest with _ compounding and lowest with compounding. A. annual ; quarterly B. quarterly ; annual C. continuous ; annual D. annual ; continuous