Question

John deposited an amount of $1000 in a bank. Seven years later, John went to the bank and found that his account increased to $2000. (a) If the bank pays the interest continuously, what are the nominal interest rate and the effective interest rate per year? (b) If the bank pays the interest per month, what are the nominal and effective interest rates per year.

Answer #1

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John deposited an amount of $1000 in a bank. Seven years later,
John went to the bank and found that his account increased to
$2000. (a) If the bank pays the interest continuously, what are the
nominal interest rate and the effective interest rate per year? (b)
If the bank pays the interest per month, what are the nominal and
effective interest rates per year.

An Engineer deposited $12,000 in a bank saving account that pays
3% per quarter.
a) How much money the engineer will find in his account after 4
years?
b) What will be the effective interest rate per six months?
c) What will be the effective interest rate per year?

A woman deposited $ 1000 in her bank account. The money remained
on the account for 10 years. During the first 5 years, the monthly
compound processed an annual nominal 15% interest. After this
period, the bank changed its interest policy and quarterly compound
processed 18% nominal interest rate annually. Calculate the money
accumulated in the account after 10 years.

1000 dollars is deposited into an account at the beginning of
the year and the value at the end of five years is 1276.30.
- If the discount was converted monthly, the nominal discount
rate is? (That is, d(12) = )
- If the account was subject to a force of interest δ(t) = kt
where t is in years, k =?
- If inflation is 1 percent a year, what is the adjusted
effective yearly interest rate?
- If...

8.Mike recently went to his local Commonwealth Bank branch. He
was offered two savings account with different interest rates. What
annually compounded rate per year will make Mike indifferent to an
account that pays 11.75% p.a. simple interest if he wishes to save
for 12 years?

Exercise IV (effective and nominal interest rate)
a. The effective interest rate is 21.44%. If there are 12
compounding periods per year, what is the nominal interest
rate?
b. What is the effective interest rate on a continuously
compounded loan that has a nominal interest rate of 25%?
c. Which is the better investment, a fund that pays 20%
compounded annually, or one that pays 18.5 % compounded
continuously?
d. Money invested at 6% per year, compounded monthly. How
money...

Assume that you deposited $1000 in a bank that offers you 12%
annual interest rate. If the bank compounds the interest rate
monthly, the amount of money you find in your account in the
5th year is

a. The effective interest
rate is 21.44%. If there are 12 compounding periods per year, what
is the nominal interest rate?
b. What is the effective interest
rate on a continuously compounded loan that has a nominal interest
rate of 25%?
c. Which is the better
investment, a fund that pays 20% compounded annually, or one that
pays 18.5 % compounded continuously?
d. Money invested at 6% per year,
compounded monthly. How money months you need to triple your
money?...

What lump sum of money must be deposited into a bank account at
the present time so that $600 per month can be withdrawn for six
years, with the first withdrawal scheduled for seven years from
today? The interest rate is 1/2% per month. (Hint: Monthly
withdrawals begin at the end of the month 84.)

3. [20PTS] Mr. Lee deposited a large amount of money in his
first bank account. Annual withdrawals of 30,000 pesos starting EOY
1 were made for 7 years to pay for personal expenses. He stopped
withdrawing after the 7th year when he was assigned to work abroad.
After 3 years of working abroad without withdrawing or depositing
from his bank account, he went back to the Philippines. He started
withdrawing money again on the 10th year with an amount of...

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