Solution to Question 15
ER = [1 + (NR / m)]m -1
ER = [1 + (.04/4)]4 - 1
ER = [1+.01]4 - 1
ER = 4.06%
FV = PV / (1+r)n
FV = $100 / (1+.0406)5
FV = $100 / 0.8196
FV = $122.02
Hence Option 1 is the correct answer
Solution to Question 16
Always to get higher FV Highest rate with lowest compounding frequency is preffered, in other words Highest rate with lowest compounding frequency results in highest FV
Hence Option E is correct as 7% rate is highest and frequency is lowest i.e monthly.
15. If $100 is placed in an account that earns a simple 4 percent, compounded quarterly,...
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