a. You want to invest $20,000 and are looking for safe investment options. Your bank is...

a. You want to invest $20,000 and are looking for safe investment options. Your bank is offering a certificate of deposit that pays a nominal rate of 8.00% that is compounded quarterly. Your effective rate of return on this investment is .?

b.Suppose you decide to deposit $20,000 into a savings account that pays a nominal rate of 10.40%, but interest is compounded daily. Based on a 365-day year, how much would you have in your account after 12 months? (Hint: To calculate the number of days, divide the number of months by 12 and multiply by 365.)

Solutions

Expert Solution

rate positively ..

Ans a)
	Effective rate of interst =	8.24%
	(1+8%/4)^4-1

	Ans =		8.24%

Ans b)	Future value =	$ 22,191.68
	20000*(1+10.4%/365)^365

	Ans =		$ 22,191.68

jeff jeffy answered 1 year ago

Next > < Previous

Related Solutions

Suppose you want to invest on long term bonds. Your options are to purchase either a...

Suppose you want to invest on long term bonds. Your options are to purchase either a 10- year zero coupon (discount) bond or a 10-year coupon bond. Assume that you are considering to sell the bond in two years. Which option has lower interest rate risk? Why? Provide an example and/or some intuition to support your answer. Would your answer change if you hold the bond until the end of the maturity? Explain. Hint: Note that a 10-year discount bond...

Suppose you want to invest enough today in an account that willgrow to $20,000 in...

Suppose you want to invest enough today in an account that will grow to $20,000 in 10 years. If you can earn 6% on your investment, how much must you set aside?Select one:a. $5,584b. $35,816c. $20,000d. $11,168

You want to buy a $20,000 vehicle and if you finance it through the bank, the...

You want to buy a $20,000 vehicle and if you finance it through the bank, the five-year financing comes to $462.12 per month. What are the annual nominal and effective interest rates your bank charges if you know that the bank applies a daily compounding?

You want to buy a car, and a local bank will lend you $20,000.The loan...

You want to buy a car, and a local bank will lend you $20,000. The loan will be paid off over 5 years with equal monthly payment.a) If the nominal interest rate of the loan is quoted as 6% with monthly compounding assumption, what is your monthly payment?b)What is the effective annual rate of Part(1)?c) If the nominal interest rate of the loan is quoted as 6% with semiannual compounding assumption, what is your monthly payment?

You want to buy a car, and a local bank will lend you $20,000. The loan...

You want to buy a car, and a local bank will lend you $20,000. The loan would be fully amortized over 5 years (60 months), and the nominal interest rate would be 12%, with interest paid monthly. a)What would be the monthly loan payment? b)What would be the loan’s EAR? c) If the nominal interest rate of the loan is quoted as 12% with semiannual compounding assumption, what is your monthly payment?

You can invest your money in either investment ONE or investment TWO. You will invest for...

You can invest your money in either investment ONE or investment TWO. You will invest for 2 years. Investment ONE yields 6% he first year and 65% the second year. Investment TWO yields 65% the first year and 6% the second year. Interest is compounded the same for both investments. Also, interest is compounded the same for both years. Which investment leads to the higher return? a. investment ONE b. investment TWO c. the return on investment ONE = the...

You are considering three investment options (and, of course, you could choose not to invest). You...

You are considering three investment options (and, of course, you could choose not to invest). You have $50,000 to invest and for your consequence you will consider the cash (in thousands of dollars) that remains one year after you make your investment. The investment amounts for each of the options and the potential returns are as follows: Investment Option Investment Amount Probability 18% 60% Large Cap Stock $50,000 Investment Outcome Excellent Average Poor Excellent Average Poor Excellent Average Poor 33%...

1) Suppose that you have $10,000 to invest and the bank offer you the following options:...

1) Suppose that you have $10,000 to invest and the bank offer you the following options: A: Interest rate of 8.5% compounded quarterly. B:Interest rate of 8.3% compounded monthly. C:Interest rate of 822% compounded weekly. D: Simple interest rate of 15% a) Order the options from worst to best, if the term of the investment is 1, 3, 10 and 20 years. b) What is the minimum number of years required for options A, B and C to be more...

a) You invest $10,000. What annual return do you need to grow this investment to $20,000...

a) You invest $10,000. What annual return do you need to grow this investment to $20,000 over 19 years? Answer in percent, rounded to one decimal place. Don't include the % symbol in your answer. b) You own a 28-year, 4.1% annual coupon bond with $1,000 face value. If the yield to maturity is 5%, how much is it worth? Round to the nearest cent. c) If you take out an amortized loan of $27,000 with a 7 year term...

You are considering two investment options. In option A, you have to invest $6,000 now and...

You are considering two investment options. In option A, you have to invest $6,000 now and $1,100 three years from now. In option B, you have to invest $3,200 now, $1,300 a year from now, and $1,000 three years from now. In both options, you will receive four annual payments of $2,200 each. (You will get the first payment a year from now.) Which of these options would you choose based on (a) the conventional payback criterion, and (b) the...

Subjects