A savings bond offers interest at a rate of 8.8% compounded semi-anually. Suppose that a $1500...

A savings bond offers interest at a rate of 8.8% compounded semi-anually. Suppose that a $1500 bond is purchased.

a) Determine the value of the investment after 12 years.

b) Describe how the shape of the graph of this function would change if a bonus of 5% of the principal was added after 5 years had passed

c)Describe how the shape of the graph changes if the size of the initial investment was doubled.

Solutions

Expert Solution

milcah answered 1 year ago

Next > < Previous

Related Solutions

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?

Question 1: A bank A offers its depositors an interest rate of 16.6% compounded semi annually....

Question 1: A bank A offers its depositors an interest rate of 16.6% compounded semi annually. Bank B also gives its depositors an interest rate of 16% compounded annually. Determine the effective interest rate for each bank and give your recommendation. Question 2: Ama is considering these three investment projects with the following details: Investment A requires a cash of $70 million at 12.6% compounded semiannually for 5 years. Investment B requires a cash of $65 million at 10% compounded...

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?

12. A corporate bond offers 9% coupon rate, compounded semi-annually. The maturity left is 7 years....

12. A corporate bond offers 9% coupon rate, compounded semi-annually. The maturity left is 7 years. The yield to maturity for bonds with such risks is 10%. Which one of the following statements is correct? each coupon payment paid out is $50 per share 10% is the interest rate you use as discount rate to find bond value each coupon payment paid out is $45 per share number of total coupon payments till maturity is 7 multiple choice. only 1...

The bank offers a certificate of deposit (CD) with a stated interest rate of 8.00% per year, compounded semi-annualy.

1. The bank offers a certificate of deposit (CD) with a stated interest rate of 8.00% per year, compounded semi-annualy. While another bank offers a CD with an interest rate of7.92% per year, compounded monthly. Which CD should you invest in if you want to maximize your effective annual rate (EAR)?2. An insurance company is offering a product called "retirement insurance." the retirement insurance promises to pay you 20,000 per year, with the first payment coming a year after your...

A 5% 20-year semi-annual bond offers an YTM of 5%. If the market interest rate will...

A 5% 20-year semi-annual bond offers an YTM of 5%. If the market interest rate will increase to 6.5% in one year (there will 19 years left to maturity then), what is the change in price that the bond will experience in dollars during the next year?

1. what is the effective interest rate for a savings accounting that is compounded quarterly at...

1. what is the effective interest rate for a savings accounting that is compounded quarterly at 8%? 2. a bond has a current market price of $1230.00. it is said to be selling at a a. premium b. discount. c. bonus d. reward 2. bond c has a $1000 face value and provides an 8% semiannual coupon for 15 years. the appropriate discount rate is 10% (annual rate). what is the value of the coupon bond? 3. if the next...

A $5000 semi-annual coupon bond paying interest at 12.4%/year compounded semi-annually is redeemable at par in...

A $5000 semi-annual coupon bond paying interest at 12.4%/year compounded semi-annually is redeemable at par in 16 years. It is callable at 115 at the end of 8 years and at 111 at the end of 11 years. Determine the price to guarantee a yield rate of 13.4%/year compounded semi-annually.

Given a nominal interest rate of 6.5% compounded semi-annually, compute: a) The equivalent nominal rate of...

Given a nominal interest rate of 6.5% compounded semi-annually, compute: a) The equivalent nominal rate of discount compounded quarterly b) The equivalent constant force of interest

You buy a 2-year, 8 percent savings certificate for $1,000. If interest is compounded semi-annually, what...

You buy a 2-year, 8 percent savings certificate for $1,000. If interest is compounded semi-annually, what will be its value at maturity? a. $1,067.43 b. $1,146.40 c. $1,169.86 d. $1,201.03 e. $1,396.57

Subjects