Answer:
Deposit = $500
Interest = 4%
Number of year N =20 years
Future value = 500 * (F/P,4%, 20)
= 500 * 2.191 = $1095.50
Correct answer: A] $1095.50
John deposits $500 in the bank at 4% interest compounding annually for 20 years. At the...
Effective versus nominal interest rates Bank A pays 9.5% interest compounded annually on deposits, while Bank B pays 9% compounded daily. a. Based on the EAR (or EFF%), which bank should you use? I. You would choose Bank A because its EAR is higher. 11. You would choose Bank B because its EAR is higher. III. You would choose Bank A because its nominal interest rate is higher IV. You would choose Bank B because its nominal interest rate is...
3) Effective versus nominal interest rates. Bank A pays 4% interest compounded annually on deposits, Bank B pays 3.75% compounded semiannually, and Bank C pays 3.5% compounded daily. a) Which bank would you use? Why? b) If you deposited $5,000 in each bank today, how much would you have at the end of 2 years? c) What nominal rate would cause Banks B and C to provide the same effective annual rate as Bank A? d) Suppose you do not...
eBook Bank A pays 7% interest compounded annually on deposits, while Bank B pays 6.5% compounded daily. a. Based on the EAR (or EFF%), which bank should you use? b. Could your choice of banks be influenced by the fact that you might want to withdraw your funds during the year as opposed to at the end of the year? Assume that your funds must be left on deposit during an entire compounding period in order to receive any interest
Universal Bank pays 6% Interest, compounded annually, on time deposits. Regional Bank pays 5% interest, compounded quarterly a. Based on effective interest rates, in which bank would you prefer to deposit your money? 1. You would choose Regional Bank because its EAR (or EFF%) is higher. II. You would choose Regional Bank because its nominal interest rate is higher. TIL. You are indifferent between the banks and your decision will be based upon which one offers you a int for...
(1 point) John opens a bank account with an initial balance of 500 dollars. Let bt be the balance in the account at time t. Thus b(0)= 500. The bank is paying interest at a continuous rate of 4% per year. John makes deposits into the account at a continuous rate of s(t) dollars per year. Suppose that s(0) 500 and that s(t) is increasing at a continuous rate of 2% per year (John can save more as his income...
Bank A pays 3% interest compounded annually on deposits, while Bank B pays 2.25% compounded daily. a. Based on the EAR (or EFF%), which bank should you use? You would choose Bank A because its EAR is higher. You would choose Bank B because its EAR is higher. You would choose Bank A because its nominal interest rate is higher. You would choose Bank B because its nominal interest rate is higher. You are indifferent between the banks and your...
Bank A pays 6% interest compounded annually on deposits, while Bank B pays 5.75% compounded daily. a. Based on the EAR (or EFF%), which bank should you use? You would choose Bank A because its EAR is higher. You would choose Bank B because its EAR is higher. You would choose Bank A because its nominal interest rate is higher. You would choose Bank B because its nominal interest rate is higher. You are indifferent between the banks and your...
(1 point) John opens a bank account with an initial balance of 500 dollars. Let b(t be the balance in the account at time t. Thus b(0) 500. The bank is paying interest at a continuous rate of 4% per year. John makes deposits into the account at a continuous rate of s(t) dollars per year. Suppose that s(0) = 500 and that s(t) is increasing at a continuous rate of 2% per year (John can as his income goes...
7) Alice deposits 50,000.00 in her bank account. Interest is calculated and compounded semi-annually. The interest rate is 8.25% in the first year, 0.50% in the second year, and 2.75% in the third year. At the end of three years Alice will have in her bank account a total balance of s calculated 1178859_answer 8) A deposit of $100.000 is made to an investment account today. At the end of each of the next four years. 55000 must be paid...
Joel deposits $1000 in his savings account at the bank, where interest is compounded annually at 1.75%. What is the amount of interest earned in the THIRD year ALONE? A. 17.50 B. 18.11 C. 17.80