Question

Second Peoples National Bank offers a long-term certificate of deposit earning 6.13% compounded monthly. Your broker locates a $20,000 zero-coupon bond rated AA by Standard & Poor's for $8965 and maturing in 14 years. Which investment will give the greater rate of return?

The Second Peoples National Bank offers a better rate of return. The zero-coupon bond offers a better rate of return. MasterCard statement shows a balance of $590 at 13.9% compounded monthly. What monthly payment will pay off this debt in 1 year 9 months? (Round your answer to the nearest cent.)

before his first attempt at bungee jumping, John decides to buy a life insurance policy. His annual income at age 30 is $35,000, so he figures he should get enough insurance to provide his wife and new baby with that amount each year for the next 35 years. If the long-term interest rate is 6.8%, what is the present value of John's future annual earnings? (Round your answer to the nearest cent.) $ Rounding up to the next $50,000, how much life insurance should he buy? (Round your original answer to the nearest $50,000.)

Answer 1

1

EAR = [(1 +stated rate/no. of compounding periods) ^no. of compounding periods - 1]* 100

? = ((1+6.13/(12*100))^12-1)*100

Effective Annual Rate% = 6.31

K = N

Bond Price =∑ [(Annual Coupon)/(1 + YTM)^k]     +   Par value/(1 + YTM)^N

k=1

K =14

8965 =∑ [(0*20000/100)/(1 + YTM/100)^k]     +   20000/(1 + YTM/100)^14

k=1

YTM% = 5.9

long-term certificate of deposit has higher return

2

PVOrdinary Annuity = C*[(1-(1+i/100)^(-n))/(i/100)]

C = Cash flow per period

i = interest rate

n = number of payments

590= Cash Flow*((1-(1+ 13.9/1200)^(-1.75*12))/(13.9/1200))

Cash Flow = 31.81

Please ask remaining parts seperately, questions are unrelated, I have done one bonus