Question

11) If a person deposits $11,500 in the bank today, what will the money be worth in 3 years at 8% if it’s 1.) compounded semi-annually; 2.) compounded quarterly; and 3.) compounded annually. a. 1.) $14,550.95; 2.) $14,584.30; 3.) $14,486.55 b. 1.) $15,550.00; 2.) $15,584.31; 3.) $15,486.65 c. 1.) $16,550.05; 2.) $16,584.32; 3.) $16,486.75 d. 1.) $17,550.99; 2.) $17,584.33; 3.) $17,486.85 e. None of the above.

12) What is the EAR for 8% if 1.) compounded annually; 2.) compounded semi-annually; and 3.) compounded quarterly.

a. 1.) 8%; 2.) 8.16%; 3.) 8.24%

b. 1.) 8%; 2.) 8.10%; 3.) 8.34%

c. 1.) 8%; 2.) 8.2%; 3.) 8.44%

d. 1.) 8%.1; 2.) 8.4%; 3.) 8.54%

e. None of the above.

Answer 1

11) If a person deposits $11,500 in the bank today, what will the money be worth in 3 years at 8% if

1.) compounded semi-annually = 11500 *(1+.08/2)^(3*2) =$14,550.95

2.) compounded quarterly =11500 *(1+.08/4)^(3*4) =$14,584.30

3.) compounded annually =11500* *(1+.08)^(3)=$14,486.55

Answer is a. 1.) $14,550.95; 2.) $14,584.30; 3.) $14,486.55

12

1.) compounded annually;

=(1+8%)^1 -1 =8%

2.) compounded semi-annually;

=(1+8%/2)^2 -1 =8.16%

and 3.) compounded quarterly.

=(1+8%/4)^4 -1 =8.24%

Answer is  a. 1.) 8%; 2.) 8.16%; 3.) 8.24%