Question

1. If a bank advertises a savings account that pays a 6% nominal interest rate compounded continuously, what is the effective annual percentage rate?

2. Bank A offers a nominal annual interest rate of 5% compounded daily, while Bank B offers continuous compounding at a 4.6% nominal annual rate. If you deposit $3,000 with each bank, what will be the difference in the two bank account balances after two years?

(Show ALL work and formulas used!)

Answer #1

Bank A offers a nominal annual interest rate of 4% compounded
daily, while Bank B offers continuous compounding at a 3.4% nominal
annual rate. If you deposit $5,000 with each bank, what will be the
difference in the two bank account balances after 3 years?

5A-1
FV CONTINUOUS COMPOUNDING If you receive $15,000 today and can
invest it at a 6% annual rate compounded continuously, what will be
your ending value after 15 years?
5A-2
PV CONTINUOUS COMPOUNDING In 7 years, you are scheduled to
receive money from a trust established for you by your
grandparents. When the trust matures there will be $200,000 in the
account. If the account earns 9% compounded continuously, how much
is in the account today?
5A-3
FV CONTINUOUS COMPOUNDING...

1.
A bank offers 6.00% on savings accounts. What is the effective
annual rate if interest is compounded daily?
Answer Format: Percentage Round to: 4 decimal places (Example:
9.2434%
2. A bank offers 9.00% on savings accounts. What is the
effective annual rate if interest is compounded continuously?
Answer Format: Percentage Round to: 4 decimal places

One bank advertises a nominal rate of 5.81% compounded
semiannually. A second bank advertises a nominal rate of 5.72%
compounded weekly. What are the effective yields? (Round your
answers to two decimal places.)
first bank
%
second bank
%
In which bank would you deposit your money?
first banksecond bank

3) The Rob U Blind Bank advertises capital savings at 7.128%
compounded semi-annually while Take Your Money Trust offers premium
savings at 7.1% compounded monthly. Suppose you have $4400.00 to
invest for two years.
a) Which deposit will earn more interest?
b) What is the difference in the amount of interest?

If you deposit $2000 in a savings account that pays an interest
equal to 6% Compounded continuously. Whats the balance at the end
of 3 years?

Suppose that you have a bank account with a balance of $4,516.10
at the beginning of the year and $4,566.10 at the end of the year.
Your bank advertises "continuous compounding," but in fact, it
compounds continuously over each 24-hour day and posts interest to
accounts daily. (Round your answers to two decimal places.)
a)What effective rate did you receive?
%
(b)What nominal rate is the calculation based on?
%
(c)What difference is there between what the bank is doing...

The BCS National Bank pays 4% nominal interest on special
three-year certificates. What is the effective annual rate if the
interest is compounded
a. every three months?
b. daily?
c. continuously

7. What is the effective annual interest rate for a bank account
that pays a continuously compounded interest rate of 8%?

You have some money on deposit in a bank account which pays a
nominal APR (or quoted) rate of 8.0944 percent, but with interest
compounded daily (using a 365 day year). Your friend owns a
security which calls for the payment of $10,000 after 27 months.
Your friend's security is just as safe as your bank deposit, and
your friend offers to sell it to you for $8,000 today. If you buy
the security, by how much will the effective...

ADVERTISEMENT

Get Answers For Free

Most questions answered within 1 hours.

ADVERTISEMENT

asked 10 minutes ago

asked 14 minutes ago

asked 17 minutes ago

asked 22 minutes ago

asked 36 minutes ago

asked 38 minutes ago

asked 38 minutes ago

asked 1 hour ago

asked 1 hour ago

asked 1 hour ago

asked 2 hours ago

asked 2 hours ago