Question

In: Finance

Your bank offers a savings account that pays a stated (nominal) interest rate of 10 percent...

Your bank offers a savings account that pays a stated (nominal) interest rate of 10 percent per year, compounded semiannually.

Requirement 1:

If you deposit $15,000 today into this account and leave it invested for 5 years, how much will you have in the account at the end of Year 5? (Enter rounded answer as directed, but do not use rounded numbers in intermediate calculations. Round your answer to 2 decimal places (e.g., 32.16).)

Account Balance

$

Requirement 2:

What is the effective annual interest rate earned on money invested in this account? (Round your answer to 2 decimal places (e.g., 32.16).)

Effective Annual Rate

%

Requirement 3:

What is the highest effective annual rate attainable with a 10 percent nominal rate?

Expert Solution

We are given the following information:

PV	15000
r	10.00%
n	5
frequency	2 (Semi Annual Compounding)

Requirement 1: We need to solve the following equation to arrive at the required FV

So the FV is $24433.42 rounded to 2 decimal places

Requirement 2: To find the effective annual return we need to solve the following equation:

Basically EAR is the equivalent annual rate that gives the same FV had the compounding been annual instead of semi-annual

Requirement 3: Maximum return is received in continuous compounding in which the FV is calculated by solving the following equation:

Or EAR = 10.52%

jeff jeffy answered 8 months ago

Your bank offers a savings account that pays a stated (nominal) interest rate of 12 percent...

Your bank offers a savings account that pays a stated (nominal) interest rate of 12 percent per year, compounded quarterly. Requirement 1: If you deposit $8,000 today into this account and leave it invested for 6 years, how much will you have in the account at the end of Year 6? (Enter rounded answer as directed, but do not use rounded numbers in intermediate calculations. Round your answer to 2 decimal places (e.g., 32.16).) Account Balance $ Requirement 2: What...

Allied Bank offers a nominal rate of 5.0% interest, compounded quarterly on a savings account. Standard...

Allied Bank offers a nominal rate of 5.0% interest, compounded quarterly on a savings account. Standard Bank offers 6.0% interest compounded annually on a savings account. Which bank will you select to deposit your money?

Bank A offers loans with a 10 percent stated annual rate and a 10 percent compensating...

Bank A offers loans with a 10 percent stated annual rate and a 10 percent compensating balance. You wish to obtain $250,000 in a six-month loan. How much must you borrow to obtain $250,000 in usable funds? Assume you do not have any funds on deposit at the bank. What is the effective annual rate on a six-month loan? How much must you borrow to obtain $250,000 in usable funds if you currently have $10,000 on deposit at the bank?...

Bank A offers a savings account with interest rate of 2% compounded quarterly. Bank B offers...

Bank A offers a savings account with interest rate of 2% compounded quarterly. Bank B offers a savings account with interest rate of 2.25% compounded semi-annually. Assume customer can deposit $5,000 and leave it on deposit for 4 years. What would be the final value for each bank account?

"You deposit $32,000 in a savings account that pays a nominal interest rate of 4.2% compounded...

"You deposit $32,000 in a savings account that pays a nominal interest rate of 4.2% compounded monthly. 3 years later, you deposit $14,000. 3 years after the second deposit, you make another deposit in the amount of $9,000. 6 years after the third deposit, half of the accumulated funds are transferred to a fund that pays a nominal interest rate of 6.9% compounded quarterly. How much total will you have in the accounts 4 years after the transfer?" SHOW ALL...

12. Second Union Bank pays 10 percent simple interest on its savings account balances, whereas Third...

12. Second Union Bank pays 10 percent simple interest on its savings account balances, whereas Third Street Bank pays 10 percent compounded annually. If you made a $100,000 deposit in each bank, how much more money would you earn from your Third Street Bank account at the end of 10 years? Group of answer choices $59,374.25 $90,625.75 $159,374.25 $190,625.75 $259,374.25

First City Bank pays 8 percent simple interest on its savings account balances

First City Bank pays 8 percent simple interest on its savings account balances, whereas Second City Bank pays 8 percent interest compounded annually. If you made a $61,000 deposit in each bank, how much more money would you earn from your Second City Bank account at the end of 8 years? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) Difference in accounts =

You just deposited $25,000 in a bank account that pays a 12.0% nominal interest rate, compounded...

You just deposited $25,000 in a bank account that pays a 12.0% nominal interest rate, compounded semi-annually. If you also add another $3,000 to the account each year over the next five years, how much will be in the account five years from now?

You just deposited $2,500 in a bank account that pays a 4.0% nominal interest rate, compounded...

You just deposited $2,500 in a bank account that pays a 4.0% nominal interest rate, compounded quarterly. If you also add another $5,000 to the account one year (4 quarters) from now and another $7,500 to the account two years (8 quarters) from now, how much will be in the account three years (12 quarters) from now? Group of answer choices $18,563.53 $17,679.55 $16,035.88 $16,837.67 $15,234.08

You just deposited $3,500 in a bank account that pays a 4.0% nominal interest rate, compounded...

You just deposited $3,500 in a bank account that pays a 4.0% nominal interest rate, compounded quarterly. If you also add another $5,000 to the account one year (4 quarters) from now and another $7,500 to the account two years (8 quarters) from now, how much will be in the account three years (12 quarters) from now?