Joan has savings of $12,000 on June 1. Since she may need some of the money during the next three months, she is considering two options at her bank. (1) An Investment Builder account earns a 2.25% rate of interest. The interest is calculated on the daily closing balance and paid on the first day of the following month. (2) A 90-to 179-day cashable term deposit earns a rate of 2.8%, paid at maturity. If interest rates do not change and Joan does not withdraw any of the funds, how much more will she earn from the term deposit option up to September 1? (Keep in mind that savings account interest paid on the first day of the month will itself earn interest during the subsequent month.)

Joan has savings of $12,000 on June 1. Since she may need some of the money during the next three months, she is considering two options at her bank. (1) An Investment Builder account earns a 2.25% rate of interest. The interest is calculated on the daily closing balance and paid on the first day of the following month. (2) A 90-to 179-day cashable term deposit earns a rate of 2.8%, paid at maturity. If interest rates do not change and Joan does not withdraw any of the funds, how much more will she earn from the term deposit option up to September 1? (Keep in mind that savings account interest paid on the first day of the month will itself earn interest during the subsequent month.)

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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Joan has savings of $12000 on June 1. Since she may need some of the savings during the next 3 months she is considering two options at her bank. an Investment builder saving account earns a 2.25% rate of interest. The interest is calculated on the daily closing balance and paid on the first day of the following month. A 90- to 179- day cashable term deposit earns a rate of 2.8% paid at maturity. If interest rates do not change and Joan does not withdraw any of the funds how much more will she earn from the term deposit up to September 1? (Keep in mind that savings accounts interest paid on the first day of the month will itself subsequently earn interest during the subsequent month.)
You have just opened a savings account which pays monthly interest at a rate of j12 = 5.5% p.a. You wish to accumulate $20,000 by depositing the same amount into the account at the end of each month, for 2 years, starting in a month's time. a) Determine the required size for the monthly deposit, R. Apply a sanity check. b) Construct a sinking fund table showing 24 deposits with a fixed interest rate of 5.5%. Describe and apply a sanity check to your table. c) Suppose that the interest rate is renewed every three months (quarterly) over the course of the two years as follows: Year 1 Q1 5.5% 02 Q3 2.8% 4.5% 04 01 4.0% 4.2% Year 2 Q2 04 03 3.8% 2.5% 7.5% If you maintain the same monthly deposit of R determined in part a), find the size of your sinking balance after two years. Will you meet your target of $20,000? Describe and apply a sanity check for your answer. d) Construct a sinking fund table showing 24 deposits with the variable interest rate. Describe and apply a sanity check to…
Jane deposits 10,000 USD and opens a deposit account at a bank. It will also deposit 6,000 USD one year later and 4,000 USD the following year. The deposit account is valued at the annual fixed effective interest rate of x%. Calculate the interest rate (x), if the value of the money in his account at the time Suat deposits 4,000 USD is 22,000 USD? Thanks
An investor has accumulated $6,800 and is looking for the best rate of return that can be earned over the next year. A bank savings account will pay 5%. A one-year bank certificate of deposit will pay 7%, but the minimum investment is $9,800. Required: Calculate the amount of return the investor would earn if the $6,800 were invested for one year at 5%. Calculate the net amount of return the investor would earn if $3,000 were borrowed at a cost of 15%, and then $9,800 were invested for one year at 7%. Calculate the net rate of return on the investment of $6,800 if the investor accepts the strategy of part b. Note: Round your answer to 2 decimal places.
Suppose Jorge Otero has set up an annuity due with a certain credit union. At the beginning of each month, $130 is electronically debited from his checking account and placed into a savings account earning 6% interest compounded monthly. What is the value (in $) of Jorge's account after 17 months?
Suat opens a deposit account in a bank by depositing 10,000 TL. In addition, he will deposit 6,000 TL into the account one year later and 4,000 TL the following year. The deposit account is valued at the annual fixed effective interest rate %. Calculate the interest rate, i, if the value of the money in Suat's account is 22,000 TL at the time that Suat deposits 4,000 TL.
It is now January 1, 2018. You will deposit $1,000 today into a savings account that pays 8 percent.a. If the bank compounds interest annually, how much will you have in your account on January 1, 2021?b. What would your January 1, 2021, balance be if the bank used quarterly compounding? c. Suppose you deposit $1,000 in 3 payments of $333.333 each on January 1 of 2019, 2020, and 2021.How much would you have in your account on January 1, 2021, based on 8 percent annual compounding?d. How much would be in your account if the 3 payments began on January 1, 2018? e. Suppose you deposit 3 equal payments in your account on January 1 of 2019, 2020, and 2021.Assuming an 8 percent interest rate, how large must your payments be to have the same ending balance asin part a?
The parents of a child decided to make annual deposits into a saving account, with the firstdeposit being made on the child’s sixth birthday and the last deposit on the 14th birthday. Then,starting on the child’s 16th to the 19th birthday the withdrawals are $3,000, $3,400, $3,800, and$4,200 respectively. If the effective annual interest rate is 6% during this period of time.What are the annual deposits in years 6 through 14? Use a uniform gradient amount (G) inyour solution
(b) Peter has $10,000 that he can deposit in any three savings accounts for a 3- year period. Bank A compounds interest on an annual basis, Bank B compounds interest twice each year, and Bank C compounds interest each quarter. All three banks have a stated annual interest rate of 4%. What amount would Peter have at the end of the third year, leaving all interest paid on deposit, in each bank? On the basis of your findings, which bank should Peter choose? Why? ( 12)
There is an investor stating they will pay out $84,000 at the end of 4 years. In order to invest into the opportunity, you'll need to make a deposit of $10,000 to thier indicated bank account. What is the average annaul return rate
Pete opens a simple intrest savings account that earns 5% annual interst with an intial deposit of $3,500. What will the balance be in his savings account at the end of 18 months?
Calculate the final balance on each bank account after making deposits in them with the following terms: A) A bank account that pays 3.5% per yearly period (i.e. the EAR) for the next 3 years in total. If you deposit $1 into a bank account that pays 3.5% per year for 3 years, the amount you will receive after 3 years is $ (Round your answer to five decimal places) B) A bank account that pays 2.3% every 6-month period for the next 3 years in total. If you deposit $1 into a bank account that pays 2.3% every 6 months for 3 years, the amount you will receive after 3 years is $ (Round your answer to five decimal places) C) A bank account that pays 8.0% per 18-month period for the next 3 years in total. If you deposit $1 into a bank account that pays 8.0% every 18 months for 3 years, the amount you will receive after 3 years is $ (Round your answer to five decimal places)

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