Question

5.

Your bank balance is exactly $10,000. Three years ago you deposited $7,938 and have not touched the account since. What annually compounded rate of interest has the bank been paying?

Group of answer choices

8.65%

26.00%

8.00%

6.87%

6.

Which of the following interest rates will come closest to doubling invested money in five years?

Group of answer choices

13%

14%

15%

16%

Answer #1

5. Present value = Amount three years ago = PV = $7938

Time period = n = 3 years

Future value = Amount after three years = FV = $1000

Annual compounded rate = r

Future value is calculated using the formula:

FV = PV*(1+r)n

10000 = 7938*(1+r)3

1+r = (10000/7938)1/3 = 1.0800146215799

r = 1.0800146215799 - 1 = 0.0800146215799 ~ 8.00% (Rounded to two decimals)

**Answer 5 -> 8.00%**

6. Suppose we have $1 and it doubles to $2 in 5 years

Present Value = PV = $1

Future value = FV = $2

Time period = n = 5 years

Interest rate = r

Future value is calculated using the formula:

FV = PV*(1+r)n

2 = 1*(1+r)5

1+r = (2/1)1/5 = 1.14869835499704

r = 1.14869835499704 - 1 =14.869835499704% ~ 15% (Rounded to nearest percentage)

**Answer 6 -> 15%**

Fifteen years ago, you deposited $12,500 into an investment
fund. Five years ago, you added an additional $20,000 to that
account. You earned 8%, compounded semi-annually, for the first ten
years, and 6.5%, compounded annually, for the last five years.
Required:
a) What is the effective annual interest rate (EAR) you would
get for your investment in the first 10 years?
b) How much money do you have in your account today?
c) If you wish to have $85,000 now,...

Fifteen years ago, you deposited $12,500 into an investment
fund. Five years ago, you added an additional $20,000 to that
account. You earned 8%, compounded semi-annually, for the first ten
years, and 6.5%, compounded annually, for the last five years.
Required: 1. a) What is the effective annual interest rate (EAR)
you would get for your investment in the first 10 years?
2. b) How much money do you have in your account today?
3. c) If you wish to...

You have deposited $10,000 in a bank earning interest at 7% p.a.
compounded quarterly for four years and five months. At that time,
the interest rate changes to 6% p.a. compounded monthly. What is
the value of the deposit three years after the change in the rate
of interest?

Six years ago, you borrowed $200,000 for a ten-year period from
BOB Bank at a stated interest rate of 10% p.a. with interest
compounded quarterly. You have been making equal, quarterly
payments on the loan during this time and now wish to repay the
loan in full. The amount that you need to repay the bank today is
closest to:
Group of answer choices
$142,494.
$72,524.
$104,012.
$187,678.

Assume that ten years ago, you deposited $2,600 in an interest-
earning bank account. Assume that you have not withdrawn any of
your money since then and now you have $4,834.92. What was the
annual interest rate you earned during the last ten years assuming
the bank calculates and adds interest to your account once every
year?

You have deposited $10,000 in a bank earning interest at 7% p.a.
compounded quarterly for four years and five months. At that time,
the interest rate changes to 6% p.a. compounded monthly. What is
the value of the deposit three years after the change in the rate
of interest?
What nominal annual rate compounded quarterly is equivalent to
7.5% p.a. compounded monthly?
You have decided to deposit $500 in the Montreal bank at the end
of each quarter for seven...

You have $10,000 to deposit for five years. Which bank should
you
select?
If you deposit $10,000 in ABC Bank that pays simple interest of
4%, what is the total balance in the account after 5 years?
Say you deposit $10,000 in XYZ Bank that pays interest of 4%,
compounded annually. What is the total balance in the account after
5 years?
Which bank did you select and why?

Two banks offer different interest rates on your deposit
of $10,000 over 3 years. Bank A offers an 8% interest compounded
annually and Bank B offers an 8.5% simple annual interest. Which
would earn the most interest (INT) over the 3 year period, and by
how much?

If you were asked the question “How much would I need to have
deposited three years ago at 12% compounded annually to have $1,000
today?”, which table would you use to find the answer?

Suppose, two years ago, you purchased a 10-year coupon bond
paying 4.5% interest annually with a face value of $1000. It is now
two years later and you just received an interest payment yesterday
(the bond matures in exactly eight years). You look in the paper
and the yield on comparable debt is 4.25%. What is the bond
currently worth?
Group of answer choices
$1,017
$976
$1,135
none of them
$1,060

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