Question

In: Finance

Sarah has invested $7,800 in a savings certificate paying a guaranteed rate of 4.28% compounded quarterly...

Sarah has invested $7,800 in a savings certificate paying a guaranteed rate of 4.28% compounded quarterly for a term of eight years. Note this is a single payment. a. Find the interest rate per conversion interval. b. Find the future value of the investment at the end of eight years. . c. Find the total interest earned over the eight years. d. Set up the expression for finding the effective annual rate (EAR) of 4.28% compounded quarterly and evaluate the expression. Express your answer to four places after the decimal point. (Example: 0.1234)

Solutions

Expert Solution

1.
=4.28%/4=1.07%

2.
=7800*(1+4.28%/4)^(4*8)=10964.9613481915

3.
=7800*(1+4.28%/4)^(4*8)-7800=3164.96134819145

4.
EAR=(1+nominal rate/4)^4-1=(1+4.28%/4)^4-1=4.349185327996%


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