Question

17. You are considering two investments described below:

Investment

A 10% compounded quarterly

B r compounded semiannually

Both investments A and B have equal annual percentage yields. Find r.

a. 19.875%

b. 10%

c. 10.38%

d. 10.125%

e. 12.0%

18. At 18.9% percent compounded annually, $50,000 will double in about:

a. 6.5 years

b. 4 years

c. 9 years

d. 12 years

e. none of the above

Answer 1

Answer(17)

Let Principal be $1,000

Amount if Compounded quaterly @10%

=P(1+r/4)4n

=1000(1+0.10/4)4

=1000(1.025)4

=1000(1.1038)

=$1103.8

Interest=$1103.8-1000

=$103.8

Annual Yeild=103.8/1000*100

=10.38%

Amount if Compounded Semiannualy @ r%

P(1+r/2)2n

1000(1+r/2)2

Interest=1000(1+r/2)2-1000

Annual Yeild=1000[(1+r/2)2-1]*100/1000=10.38

=10.38/100+1

(1+r/2)2=1.1038

r/2=1.0506-1=.0506

=10.12%

Answer (18)

P=$50,000

A=100,000

A=P(1+R/100)n

1,00,000=50,000(1+18.9/100)n

2=(1.189)n

N=4 years