Another bank is also offering favorable terms, so Rahul decides to take a loan of $12,000 from this bank. He signs the loan contract at 5%compounded daily for 12 months. Based on a 365-day year, what is the total amount that Rahul owes the bank at the end of the loan's term? (Hint:To calculate the number of days, divide the number of months by 12 and multiply by 365.)O $12,236.75O $12,362.91O $12,489.06O $12,615.21 12. Nonannual compounding periodThe number of compounding periods in one year is called compounding frequency. The compounding frequency affects both the present and futurevalues of cash flows.An investor can invest money with a particular bank and earn a stated interest rate of 4.40%; however, interest will be compounded quarterly. Whatare the nominal, periodic, and effective interest rates for this investment opportunity?Interest RatesNominal ratePeriodic rateEffective annual rateRahul needs a loan and is speaking to several lending agencies about the interest rates they would charge and the terms they offer. He particularlylikes his local bank because he is being offered a nominal rate of 4%. But the bank is compounding bimonthly (every two months). What is theeffective interest rate that Rahul would pay for the loan?O 4.067%O 3.945%O 3.926%O 3.973%

First let determine the formula to compute the amount when compounded daily. This is calculated with…

Another bank is also offering favorable terms, so Rahul decides to take a loan of $12,000 from this bank. He signs the loan contract at 5% compounded daily for 12 months. Based on a 365-day year, what is the total amount that Rahul owes the bank at the end of the loan's term? (Hint: To calculate the number of days, divide the number of months by 12 and multiply by 365.) O $12,236.75 O $12,362.91 O $12,489.06 O $12,615.21

Another bank is also offering favorable terms, so Rahul decides to take a loan of $12,000 from this bank. He signs the loan contract at 5% compounded daily for 12 months. Based on a 365-day year, what is the total amount that Rahul owes the bank at the end of the loan's term? (Hint: To calculate the number of days, divide the number of months by 12 and multiply by 365.) O $12,236.75 O $12,362.91 O $12,489.06 O $12,615.21

Financial Management: Theory & Practice

16th Edition

ISBN:9781337909730

Author:Brigham

Publisher:Brigham

Chapter4: Time Value Of Money

Section: Chapter Questions

Problem 8MC: Define the stated (quoted) or nominal rate INOM as well as the periodic rate IPER. Will the future...

See similar textbooks

Similar questions

Assume that an investment of 100,000 produces a net cash flow of 60,000 per year for two years. The discount factor for year 1 is 0.89 and for year 2 is 0.80. The NPV is a. 0 b. 6,800 c. 1,400 d. (4,000)
An investment of 1,000 produces a net cash inflow of 500 in the first year and 750 in the second year. What is the payback period? a. 1.67 years b. 0.50 year c. 2.00 years d. 1.20 years e. Cannot be determined
Define the stated (quoted) or nominal rate INOM as well as the periodic rate IPER. Will the future value be larger or smaller if we compound an initial amount more often than annually—for example, every 6 months, or semiannually—holding the stated interest rate constant? Why? What is the future value of $100 after 5 years under 12% annual compounding? Semiannual compounding? Quarterly compounding? Monthly compounding? Daily compounding? What is the effective annual rate (EAR or EFF%)? What is the EFF% for a nominal rate of 12%, compounded semiannually? Compounded quarterly? Compounded monthly? Compounded daily?
8. Nonannual compounding period The number of compounding periods in one year is called compounding frequency. The compounding frequency affects both the present and future values of cash flows. An investor can invest money with a particular bank and earn a stated interest rate of 15.40%; however, interest will be compounded quarterly. What are the nominal, periodic, and effective interest rates for this investment opportunity? Interest Rates Nominal rate    Periodic rate    Effective annual rate    You want to invest $11,000 and are looking for safe investment options. Your bank is offering you a certificate of deposit that pays a nominal rate of 14% that is compounded bimonthly (every two months). What is the effective rate of return that you will earn from this investment? 14.843% 15.026% 14.964% 14.702% Suppose you decide to deposit $11,000 in a savings account that pays a nominal rate of 6%, but interest is…
12. Nonannual compounding period The number of compounding periods in one year is called compounding frequency. The compounding frequency affects both the present and future values of cash flows. A. An investor can invest money with a particular bank and earn a stated interest rate of 6.60%; however, interest will be compounded quarterly. What are the nominal, periodic, and effective interest rates for this investment opportunity? Interest Rates Nominal rate    Periodic rate    Effective annual rate    B. You want to invest $24,000 and are looking for safe investment options. Your bank is offering you a certificate of deposit that pays a nominal rate of 6% that is compounded quarterly. What is the effective rate of return that you will earn from this investment? 6.221% 5.995% 6.014% 6.136% C. Suppose you decide to deposit $24,000 in a savings account that pays a nominal rate of 12%, but interest is…
The number of compounding periods in one year is called compounding frequency. The compounding frequency affects both the present and future values of cash flows. An investor can invest money with a particular bank and earn a stated interest rate of 15.40%; however, interest will be compounded quarterly. What are the nominal, periodic, and effective interest rates for this investment opportunity? Interest Rates Nominal rate    Periodic rate    Effective annual rate    You want to invest $11,000 and are looking for safe investment options. Your bank is offering you a certificate of deposit that pays a nominal rate of 14% that is compounded bimonthly (every two months). What is the effective rate of return that you will earn from this investment? 14.843% 15.157% 15.026% 14.928% Suppose you decide to deposit $11,000 in a savings account that pays a nominal rate of 6%, but interest is compounded daily. Based on a 365-day…
Consider the following cash flows: Year Cash Flow 2 $ 22,900 3 40,900 5 58,900 Assume an interest rate of 9.7 percent per year. a. If today is Year 0, what is the future value of the cash flows five years from now? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) b. If today is Year 0, what is the future value of the cash flows ten years from now? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)
Time value of MoneyPart-I, Mr. Zigong wishes to know about the future values of the single cash flow deposited today that will beavailable at the end of the deposit period if the interest is compounded annually at the rate specified oversome specific period. For example, the situation for the first case is that single cash flow is 200$, interestrate is 5%, and deposit period is 20 years. Under second case, single cash flow is 4500$, interest rate is8%, and deposit period is 7 years. Whereas under third case, single cash flow is 10,000$, interest rate is9%, and deposit period is 10 years. In addition, under fourth case, single cash flow is 25,000$, interestrate is 10%, and deposit period is 12 years. Besides, under last case, single cash flow is 37000$, interestrate is 11%, and deposit period is 5 years, respectively. Part-II, The significance of present value is quite vital in the financial world of the business. Calculate the present value of the cash…
What is the future value at the end of year three of the following set of cash flows at an interest rate of 10% p.a. compounded annually? End of Year 1 $5,100 End of Year 2 $2,300 End of Year 3 $1,150 Select one: a. $8,550 b. $9,966 c. $9,851 d. $9,581
What is the present value of end-of-year cash flows of $9,000 per year, with the first cash flow received ten years from today(Year 10)and the last one 42years from today(Year 42)? Assume interest rate of 6%.(Note: This question is worth more
Find the effective interest rate (effective annual yield) of an investment that pays 10% per year (quoted or nominal rate) with the interest reinvested quarterly. a. .116 b. .199 c. .104 8 d. 188 The effective interest rate (effective annual vield) is the actual percentage interest paid by the bank
9. Calculate the future value of money at the end of 8 years and 8 months if P5,200 is invested at an interest rate of 12% compounded quarterly and using simple interest for anytime less than a year interest period? Show the Cash Flow Diagram. State your reference period in the solution as reflected in the diagram. 10. A man borrowed P180,000 from a lending firm for 6 years at 9% compounded quarterly. At the end of 6 years, it renews the loan for the amount due plus P80,000 more for 6 years at 4 % compounded monthly. Determine the value of money at the end of the extended period? Show the Cash Flow Diagram. State your reference period in the solution as reflected in the diagram. Note: Use only two decimal places for the final answer and four decimal places for the solutions. Answer the problem with the given Format: Given, Required, Solution, Answer. Thank you!