First simple bank pays 6.4 percent simple interest on its investment accounts. If first complex bank pays pays interest on its accounts compounded annually, what rate should the bank set if it wants to match First simple bank over an investment horizon of 10 years?

First simple bank pays 6.4 percent simple interest on its investment accounts. If first complex bank pays pays interest on its accounts compounded annually, what rate should the bank set if it wants to match First simple bank over an investment horizon of 10 years?

Corporate Fin Focused Approach

5th Edition

ISBN:9781285660516

Author:EHRHARDT

Publisher:EHRHARDT

Chapter4: Time Value Of Money

Section: Chapter Questions

Problem 3STP

See similar textbooks

Related questions

Q: Standard Chartered Bank Berhad pays 7 percent annual interest on its fixed deposit account, whereas…

A: Deposit = 5000 Standard Chartered Bank Annual Rate = 7% Time Period (N) = 8 years UOB Bank…

Q: CBG pays 10 percent per annum simple interest on its savings account balances, GCB pays 8 percent…

A: Future Value refers to the value of the current asset or investment or of cash flows at a specified…

Q: First City Bank pays 6% annual simple interest on its saving account balances, whereas Second City…

A: given, first bank simple interest=6%second bank compound interest =6%p=$7500n=10 years

Q: First City Bank pays 5 percent simple interest on its savings account balances, whereas Second City…

A: simple interest formula: A=p×1+rtwhere,A=amountP=principalr=ratet=time in years compound interest…

Q: You take out a 5-year loan of $20,000 from a bank today, where repayments are made at the end of…

A: Given, The loan amount is $20,000 Term of loan is 5 years Nominal rate is 8% compounded monthly.

Q: An initial deposit of $8500 is made into an account now, and a second deposit of $16000 is made into…

A: The future value of any deposits is the compounded value of the deposits made in the specified time…

Q: A bank that provides overdraft protection charges 12 percent for each $100 (or portion of $100)…

A: Part (a)The overdraft protection charge = 12% for each $100 (or portion of $100) borrowedThus 12% is…

Q: You borrow $ 1 million on a 10-year loan from a bank to finance the expansion of your business.…

A: Note: Since you have posted a question with multiple sub-parts, we will solve first three sub-parts…

Q: Rs. 9,000 to deposit. ABC Bank offers 12 percent per year compounded monthly, while King Bank…

A: The given problem can be solved using FV function in excel. FV function computes amount accumulated…

Q: How much will your investment be worth in 17 years at each bank?

A: Time value of money (TVM) means that the amount received in the present will have more value than…

Q: If P25, 000 is deposited now into a savings account that earns 6% per year, what uniform annual…

A: Present Value of Ordinary Annuity refers to a concept that determines the value of cash flows at…

Q: $7000 are invested in a bank account at an interest rate of 5 percent per year. Find the amount in…

A: To find the amount after certain period we have to use the compound interest formula : A = P 1+r100n…

Q: Whatis the future sum of 1,900, given that it will be held in the bank for 25 years and earn 17…

A: The future value function or concept can be used to determine the future value of a present sum or…

Q: Suppose an individual makes an initial investment of $2,600 in an account that earns 7.8%,…

A: Here, Initial Investment is $2,600 Interest Rate is 7.8% Compounding period for deposit and…

Q: Commercial bank pays 12% interest and compounds quarterly. If 1000 are initially, how much shall it…

A: Computation:

Q: The bank is paying 9% interest compounded quarterly. If you deposit P5,000 at the beginning of each…

A: Interest rate (r) = 9% per annum = 2.25% per quarter Quarterly deposit (Q) = P 5000 n = 10 years =…

Q: A bank offers an investment account that has an annual interst rate of 9.9%, compounded quarterly.…

A: The present value is the value of the sum received at time 0 or the current period. It is the value…

Q: You have a bank deposit now worth $5000. How long will it take for your deposit to be worth more…

A: Interest is an additional amount which is earned on deposited amount for the period. It increases…

Q: What lump sum of money must be deposited into a bank account at present time so that $1,500 per…

A: Semi annual withdrawal = $ 1500 Period = 10 Years Number of withdrawals = 10*2 = 20 First withdrawal…

Q: John Johnson borrowed $15,550 from a bank for three years. If the quoted rate (APR) is 5.20 percent,…

A: In the given question we need to compute the effective annual interest rate (EAR) if the nominal…

Q: You have $5,000 to deposit. Regency Bank offers 15 percent per year compounded monthly (1.25 percent…

A: Data given:: Amount = $5000 Regency Bank offers = 15% compounded monthly (15%/12 = 1.25%) King Bank…

Q: Dhofar Insurance Company has made an investment in another company that will guarantee it a cash…

A: Given: Cash flows = OMR 37,250 Discount rate = 15% Years = 5

Q: If you invest $900 in a bank in which it will earn 8 percent compounded quarterly, how much will it…

A: PV = $ 900; r = 8% compounded quarterly; m = frequency of compounding = 4 (as there are four…

Q: Gizmonic Institute Corp. needs to take out a one-year bank loan of $400,000 and has been offered…

A: Bank loan = $400,000 Simple interest rate = 9% Add on interest rate = 6%…

Q: stomer wishes to have an amount of R300 000 at the end of 10 years. The bank pays an interest rate…

A: The given problem can be solved using PV function in excel. PV function computes present worth for…

Q: An investment promises to pay into an account that pays you 6 percent annually, $150 per month for…

A: For this first find out future value factor annuity and find future value and than find value at end…

Q: Bank A pays 6% simple interest annually on its investment accounts. If Bank B pays interest on its…

A: Bank A: Simple Interest Rate (r) = 6% or 0.06 (Annually)Time Period (t) = 10 years…

Q: What is the present value of $700 to be received in two equal installments ($350 each), two years…

A: Hello. Since your question has multiple parts, we will solve first question for you. If you want…

Q: CNB, Inc. will deposit $25,000 into a money market account at the end of each year for the next…

A: Compound Amount= A=P(1+r)nt A= FInal amount P= Initial Investment r= interest rate t= No. of times…

Q: First City Bank pays 6 percent simple interest on its savings account balances, whereas Second City…

A: Amount deposited (PV) in the Second City Bank is $66,000 Number of years (n) of deposit is 10 years…

Q: If an amount of $10,000 is deposited into a savings account at an annual interest rate of 4%,…

A: Here in this question we are required to calculate the compounded interest of investment after 8…

Q: A bank is currently offering a savings account paying an interest rate of 6.0 percent compounded…

A: Equivalent annual rate: It is an annual rate of interest whether compounded monthly, quarterly, or…

Q: Suppose an individual makes an initial investment of $2,600 in an account that earns 7.8%,…

A: The time value of money refers to the concept that states that the money present today is more…

Q: promises to quadruple your investment over a period of 15 years based on semi-annual compounding.…

A: The given problem can be solved using RATE function in excel. RATE function computes interest rate…

Q: If P30,000 is deposited each year for 9 years. How much annuity can a person get annually from the…

A: An annuity refers to a fixed amount or stream of payments or deposits made. Therefore, it helps in…

Q: Suppose that $1,500 is placed in a bank account at the end of each quarter over the next 20 years.…

A: Use the following formula to calculate the effective interest rate (EIR). Where i is the effective…

Q: A bank offers and investment account that has an annual interst rate of 9.9%, compounded quarterly.…

A: The present value is the value of the sum received at time 0 or the current period. It is the value…

Q: .A series of equal cash $200 that is deposited at the end of each month will last for 10 years. How…

A: Monthly deposit (M) = $200 n = 10 years = 120 payments r = 9% per annum = 0.75% per month

Q: A person invests 100,000 TL in bank deposits with an annual nominal interest rate of 10%,…

A: According to the time value of money concept, money available today worth more than the same amount…

Q: ffering MACY’S has a six-year term deposit that will pay 7% per annum compounded quarterly. If…

A: EAR stands for effective annual rate. EAR is greater than APR (annual percentage rate) when the…

Q: How much money must be deposited in a savings account each quarter in order to accumulate $10,000 at…

A: The Future Value of the annuity is the total value of all the payments which is occurred regularly…

Q: You have Rs. 9,000 to deposit. ABC Bank offers 12 percent per year compounded monthly, while King…

A: Future Value = Deposit Amount * ( 1 + Peroidic rate )Number of periods

Q: A bank is negotiating a loan. The loan can either be paid off as a lump sum of $140,000 at the end…

A: Using excel PMT function

Q: Bank A offers a nominal annual interest rateof 6.5% compounded daily, while Bank B offerscontinuous…

A: The future value of the cash flow is the future worth of a cash flow at a certain rate of interest…

Concept explainers

Calculating the Return On A Loan

Question

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!

SEE SOLUTION Check out a sample Q&A here

Step 1

VIEW

Step 2

VIEW

Step 3

VIEW

Trending now

This is a popular solution!

Step by step

Solved in 3 steps with 4 images

SEE SOLUTION Check out a sample Q&A here

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.

Similar questions

If Bergen Air Systems takes out a $100,000 loan, with eight equal principal payments due over the next eight years, how much will be accounted for as a current portion of a noncurrent note payable each year?
You put $250 in the bank for S years at 12%. A. If interest is added at the end of the year, how much will you have in the bank after one year? Calculate the amount you will have in the bank at the end of year two and continue to calculate all the way to the end of the fifth year. B. Use the future value of $1 table in Appendix B and verity that your answer is correct.
You put $600 in the bank for 3 years at 15%. A. If Interest Is added at the end of the year, how much will you have in the bank after one year? Calculate the amount you will have in the bank at the end of year two and continue to calculate all the way to the end of the third year. B. Use the future value of $1 table In Appendix B and verify that your answer is correct.
You want to invest $8,000 at an annual Interest rate of 8% that compounds annually for 12 years. Which table will help you determine the value of your account at the end of 12 years? A. future value of one dollar ($1) B. present value of one dollar ($1) C. future value of an ordinary annuity D. present value of an ordinary annuity