A bank advertises the following deal: "Pay us $100 a year for 10 years and then we will pay you (or your beneficiaries) $100 a year forever." Is this a good deal if the interest rate available on other deposits is 8%?
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23.
A bank advertises the following deal: "Pay us $100 a year for 10 years and then we will pay you (or your beneficiaries) $100 a year forever." Is this a good deal if the interest rate available on other deposits is 8%?
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- Q4. A local bank advertises the following deal: "Pay us $100 at the end of each year for 10 yearsand then we will pay you (or your beneficiaries) $100 at the end of each year forever."A. Calculate the present value of your payments to the bank if the interest rate is 8.25%.B. What is the present value of a $100 perpetuity deferred for 10 years if the interest rate is8.25%?C. Is this a good deal?A local bank advertises the following deal: “Pay us $100 a year for 10 years and then we will pay you (or your beneficiaries) $100 a year forever.” Is this a good deal if the interest rate available on other deposits is 8 percent? 2. Consider an APR of 12% with monthly compounding. What is the EAR (effective annual rate)?8.A bank offers a deposit promising £180 in 5 years’ time for every £100 paid intoday. What annual interest rate is the bank offering?
- Suppose Capitol Federal Bancorp offers a certificate of deposit that pays $10,000 in five years for exchange for $8,000 today. What interest rate is Capitol Federal Bancorp offering? Suppose Bank One offers a certificate of deposit that pays $5,000 in four years for exchange for $4,000 today. What interest rate is Bank One offering? How many years will take $10,000 to grow to $20,000 if bank offered rate is 10%? How many years will take $25,000 to grow to $120,000 if bank offered rate is 18%? Suppose you save $4,000 per year at the end of each year for 3 years and earn 5% interest per year. How much will you have at the end of 3 years?A bank is offering a special deal. If you invest X now, the bank will give you 15,000 at time 7; 14,000 at time 8; 13,000 at time 9; and so on with the last payment being at time 14. Using an annual effective interest rate of 8%, determine X.2. If you deposit $1500 in bank account that pays 10% interest annually, how long will it take to double your money? О а) 5 уears O b) 7.27 years O ) 5.35 years O d) 20 years O e) None of the above 3. What is the present value of a security that will pay $15,000 in 15 years if Соpy Fequal risk pay 15% annually?
- 5. You deposit PHPI,500 in your bank account. If the bank pays 4% simple interest, how much interest will you accumulate in your account after 10 years? What if the bank pays compound interest?Activity A local bank advertises the following deal: “Pay us $100 a year for 10 years and then we will pay you (or your beneficiaries) $100 a year forever.” Is this a good deal if the interest rate available on other deposits is 8 percent? Consider an APR of 12% with monthly compounding. What is the EAR (effective annual rate)? Consider an APR of 12% with monthly compounding. What is the EAR ( effective annual rate)? Consider an APR of 13.5% with quarterly compounding. What is the EAR (effective annual rate)? Consider an EAR of 13.75% with quarterly compounding. What is the APR (annual percentage rate)? Consider an EAR of 18.25% with monthly compounding. What is the APR (annual percentage rate)? A bank is offering 12 percent compounded quarterly. If you put $100 in an account, how much will you have at the end of one year? What’s the EAR? How much will you have at the end of two years? Depending on the issuer, a typical credit card agreement quotes an interest rate of 18 percent…You have a bank deposit now worth P15, 000. How long will it take for your deposit to be P20, 000 if the account pays 12% annually? (Inflation rate is 4.5% per year) a) 3.78 years b) 4.15 years c) 5.83 years d) 3.28
- If bank offers you to double your money in 12 years, what is the interest rate that it gives?1. You deposit NOK 250,000 in a savings account. The bank offers 0.25% nominal annual interest rate. How long do you have to leave the money in the account before you have NOK 260,000 in the account? a) At quarterly interest? b) By continuous interest? c) What must the interest rate be if you want to reach the savings target of 10 years by annual return?4. You are offered an annuity that will pay R17,000 per year for 7 years (the first payment will be made today). If you feel that the appropriate discount rate is 11%, what is the annuity worth to you today? 15. If you deposit R15,000 per year for 9 years (each deposit is made at the beginning of each year) in an account that pays an annual interest rate of 8%, what will your account be worth at the end of 9 years?