2. Simple versus compound interest Financial contracts involving investments, mortgages, loans, and so on are based on either a fixed or a variable interest rate. Assume that fixed interest rates are used throughout this question. Olivia deposited $800 at her local credit union in a savings account at the rate of 6.2% paid as simple interest. She will earn interest once a year for the next 7 years. If she were to make no additional deposits or withdrawals, how much money would the credit union owe Olivia in 7 years? $852.68 $1,147.20 $149.60 $1,218.88 Now, assume that Olivia’s credit union pays a compound interest rate of 6.2% compounded annually. All other things being equal, how much will Olivia have in her account after 7 years? $849.60 $75.57 $1,147.20 $1,218.88 Before deciding to deposit her money at the credit union, Olivia checked the interest rates at her local bank as well. The bank was paying a nominal interest rate of 6.2% compounded quarterly. If Olivia had deposited $800 at her local bank, how much would she have had in her account after 7 years? $81.04 $1,230.63 $850.77 $149.60
2. Simple versus compound interest Financial contracts involving investments, mortgages, loans, and so on are based on either a fixed or a variable interest rate. Assume that fixed interest rates are used throughout this question. Olivia deposited $800 at her local credit union in a savings account at the rate of 6.2% paid as simple interest. She will earn interest once a year for the next 7 years. If she were to make no additional deposits or withdrawals, how much money would the credit union owe Olivia in 7 years? $852.68 $1,147.20 $149.60 $1,218.88 Now, assume that Olivia’s credit union pays a compound interest rate of 6.2% compounded annually. All other things being equal, how much will Olivia have in her account after 7 years? $849.60 $75.57 $1,147.20 $1,218.88 Before deciding to deposit her money at the credit union, Olivia checked the interest rates at her local bank as well. The bank was paying a nominal interest rate of 6.2% compounded quarterly. If Olivia had deposited $800 at her local bank, how much would she have had in her account after 7 years? $81.04 $1,230.63 $850.77 $149.60
Intermediate Financial Management (MindTap Course List)
13th Edition
ISBN:9781337395083
Author:Eugene F. Brigham, Phillip R. Daves
Publisher:Eugene F. Brigham, Phillip R. Daves
Chapter22: Providing And Obtaining Credit
Section: Chapter Questions
Problem 3P: Del Hawley, owner of Hawleys Hardware, is negotiating with First City Bank for a 1-year loan of...
Related questions
Question
2. Simple versus compound interest
Financial contracts involving investments, mortgages, loans, and so on are based on either a fixed or a variable interest rate. Assume that fixed interest rates are used throughout this question.
Olivia deposited $800 at her local credit union in a savings account at the rate of 6.2% paid as simple interest. She will earn interest once a year for the next 7 years. If she were to make no additional deposits or withdrawals, how much money would the credit union owe Olivia in 7 years?
$852.68
$1,147.20
$149.60
$1,218.88
Now, assume that Olivia’s credit union pays a compound interest rate of 6.2% compounded annually. All other things being equal, how much will Olivia have in her account after 7 years?
$849.60
$75.57
$1,147.20
$1,218.88
Before deciding to deposit her money at the credit union, Olivia checked the interest rates at her local bank as well. The bank was paying a nominal interest rate of 6.2% compounded quarterly. If Olivia had deposited $800 at her local bank, how much would she have had in her account after 7 years?
$81.04
$1,230.63
$850.77
$149.60
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
This is a popular solution!
Trending now
This is a popular solution!
Step by step
Solved in 3 steps
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.Recommended textbooks for you
Intermediate Financial Management (MindTap Course…
Finance
ISBN:
9781337395083
Author:
Eugene F. Brigham, Phillip R. Daves
Publisher:
Cengage Learning
Intermediate Financial Management (MindTap Course…
Finance
ISBN:
9781337395083
Author:
Eugene F. Brigham, Phillip R. Daves
Publisher:
Cengage Learning
Excel Applications for Accounting Principles
Accounting
ISBN:
9781111581565
Author:
Gaylord N. Smith
Publisher:
Cengage Learning
Pfin (with Mindtap, 1 Term Printed Access Card) (…
Finance
ISBN:
9780357033609
Author:
Randall Billingsley, Lawrence J. Gitman, Michael D. Joehnk
Publisher:
Cengage Learning