1. A bank is offering to sell four-month certificates of deposit for $ 4,926. At the end of four months, the bank will pay $5,000 to the certificate owner. Based on a four-month interest period: a) What is the interest rate the bank is paying you? b) What are the nominal and effective interest rates on this certificate of deposit?

1. A bank is offering to sell four-month certificates of deposit for $ 4,926. At the end of four months, the bank will pay $5,000 to the certificate owner. Based on a four-month interest period: a) What is the interest rate the bank is paying you? b) What are the nominal and effective interest rates on this certificate of deposit?

Economics Today and Tomorrow, Student Edition

1st Edition

ISBN:9780078747663

Author:McGraw-Hill

Publisher:McGraw-Hill

Chapter6: Saving And Investing

Section6.1: Why Save?

Problem 6R

See similar textbooks

Similar questions

6. An individual makes six annual deposits of $2,000 in a savings account that pays interest at a rate of 4% compounded annually. Two years after making the last deposit, the interest rate changes to 7% compounded annually. Ten years after the last deposit the accumulated money is withdrawn from the account. How much is withdrawn?
2. A savings bank offered you 6% nominal interest compounded every 2 months. You deposited $4,000. a) How much money will you get back after 5 years? b) What is the effective interest rate?
The First National Bank is offering a 3 year certificate of deposit (CD) at 4% interest compounded quarterly; Second National Bank is offering a 3 year CD at 5% interest compounded annually. (Round your answers to two decimal places.) (a) If you were interested in investing $7,000 in one of these CDs, calculate the compound amount (in $) of each offer. (Use Table 11-1.) First National Bank Second National Bank 2$ (b) What is the annual percentage yield of each CD? First National Bank % Second National Bank % (c) If Third National Bank has a 3 year CD at 4.5% interest compounded monthly, use the compound interest formula to calculate the compound amount (in $) of this offer. $
9. City Bank charges 1 1/2% interest per month, compounded continuously on the unpaid balance purchases made on this credit card. Compute the effective rate of interest.
How much money will you have in seven yearsif you deposit $7,000 in the bank at 8.5% interestcompounded daily?
Question 1: If you borrowed 18000$ at 4% annual interest. You agreed to repay the loan with five equal annual payments. How much of the total amount repaid is interest? How much of the third annual payment is interest, and how much principal is there? If you decided to pay off your loan after the third payment, how much will you pay?
3. Suppose you make an annual contribution of $2,000 to your savings account at the beginning of each period (annuity due). If your savings account earns 6% interest annually, how much can be withdrawn at the end of five years?
5. For an interest rate of 8% compounded annually, find: a. How much can be loaned now if $5,000 will be repaid at the end of 5 years?
1. Mary buys a 20 year annuity immediate for $100,000 subject to 6% effective annual interest rate. The first payment is one year from the time of purchase. Mary reinvests each of the 20 payments, as soon as she received them at the end of each year, into a fund that earns 8% interest on deposits. What is the accumulated amount in Mary's fund right after the 20th annuity payment has been deposited into the fund?
If you borrowed $30,000 at 25% annual interest. You agreed to repay the loan with five equal annual payments. How much of the total amount repaid is interest? How much of the third annual payment is interest, and how much principal is there? If you decided to pay off your loan after the third payment, how much will you pay? (Please Include Equations used and cashflow diagram)
5. Define the terms: mortgage and down payment?
1. A bank charges 1.5% per month on a loan. Find the equivalent nominal rate of interest. 2. A financing company charges 1.5% per month on a loan. Find the equiv alent effective rate of interest. 3. A nominal rate of 12% compounded monthly is equal to an effective rate of interest. 4. Convert 16% compounded semi-annually to equivalent nominal rate which is compounded daily.