Answered: Suppose that you make quarterly…

Suppose that you make quarterly deposits into a savings account that earns 8% interest compounded monthly. Compute the effective interest rate per quarter.

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter5: The Time Value Of Money

Section: Chapter Questions

Problem 4QTD

See similar textbooks

Related questions

Q: A credit card company compounds monthly and charges an interest of 1 ½ % per month. What is the…

A: Effective Interest Rate It is a rate that discounts the approximate future cash flows over the…

Q: A person deposits an annual amount into a savings account that decreases at a constant rate of $ 500…

A: Here, First Deposit is $10,000 Constant Decrease in payment is $500 Interest Rate is 15% Last…

Q: Suppose you deposit $469 per week in a bank account for 5 years. The interest rate(APR) is 7.2%,…

A: present value of annuity = P * {1-[1/(1+r)^n]/r} Where, r = rate of interest per period i.e. 7.2%/52…

Q: If $3500 is deposited at the end of each quarter in an account that earns 7% compounded quarterly,…

A: Future value of annuity is: = P * ([1 + I]^N - 1 )/I, where P is annuity amount. I is equal to the…

Q: If you deposit $100 in a savings account at the end of each month for 2 years, the balance will be a…

A: Ordinary Annuity means a series of equal payments that are made over a fixed length of time at the…

Q: In the given qustion as follows , consider making monthly deposits of P dollars in a savings account…

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

Q: Suppose you have received a credit card offerfrom a bank that charges interest at 1.4% per…

A: Working note:

Q: investment

A: Introduction: The effective annual interest rate can be defined as a real return which is earned on…

Q: You deposit $10,000 in a bank that pays an annual interest rate of 6% compounded quarterly how much…

A: We need to use compound interest formula for calculation of amount after 5 years A=P(1+r)n Where…

Q: You deposit $24,000.00 in an account that pays 6% compounded quarterly and immediately start making…

A: In this problem you have to find out present value FACTOR and find out quarterly deposits.

Q: If the bank states an effective interest rate of 13.5% per year, and there are 52.15 weeks, how much…

A: Formula for calculating weekly interest rate is:

Q: How much do you need to invest in an account earning an annual interest rate of 3.493% compounded…

A: The present value of an investment refers to the sum amount of money that will be required today in…

Q: If the bank is paying 8% interest compounded quarterly, how much must you deposit today in your…

A: The formula to calculate the present value of future cash inflow is C/(1+r)n, where C is the cash…

Q: suppose that $575.75 is invested in a savings account with an APR of 12% compounded monthly. What is…

A: Future value is the worth of the current amount in some future specified date at given interest…

Q: A sum of money is deposited now in a savings account. The effective annual interest rate is 12% and…

A: There are various types of Bank Accounts, one of the basic and most commonly used is Saving's…

Q: Suppose you deposit $1,250 at the end of each quarter in an account that will earn interest at an…

A: Computations as follows: Hence, the amount available at the end of four year is $24,225.28.

Q: If your credit card’s APR is 24% compounded daily, what isthe effective annual interest rate that…

A: Given information: APR is 24% compounded daily

Q: A passbook savings account has a rate of 6%. Find the effective annual yield, rounded to the…

A: With the given information, we can calculate the effective yield using the steps below:

Q: If $6000 is invested in an account. After three years, the account has $7500 in it. If money is…

A: Question is based on the concept of Time value

Q: Suppose that $1,000 is invested for 4 years at an interest rate of 12%, compounded quarterly. How…

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

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: If you borrow $24398 with an annual rate of 9% compounded monthly and make a payment of $282 every…

A: Here we will use the concept of time value of money. As per the concept of time value of money the…

Q: You are paying an effective annual rate of 15.33 percent on your credit card. The interest is…

A: Calculation of annual Percentage of rate is shown below:

Q: how much money must you put in a savings account today?

A: PV is the money value in today’s terms which is to be received at some future date whereas FV is the…

Q: What is the interest earned in a savings account after 12 months on a balance of $1000 if the…

A: Because a dollar on hand now is worth more than a dollar promised in the future, the time value of…

Q: How much money must initially be deposited in a savings account paying 5% per year, compounded…

A: Formulas:

Q: Suppose that you deposit $10 at the end of each day into a savings account that pays 2% interest…

A: Accumulated value can be defined as the sum of investment and interest earned on investment over a…

Q: A bank pays a stated annual interest rate of 8 percent. What is the effective annual rate using the…

A: In the given question we require to compute the effective annual rate if annual interest rate is 8%.

Q: If $5500 is deposited at the end of each quarter in an account that earns 7% compounded quarterly,…

A: Given data; deposit amount = $5500 rate of interest = 7% Future value of annuity = $90,000

Q: A bank promises to pay an interest rate of 13.9 percent compounded quarterly. What is the effective…

A: Using excel effective rate formula

Q: you make 11 semi annual deposits of 550 pesos into a savings account the interest rate is 4.72%…

A: Interest rate=4.72% compounded quarterly Interest rate per quarter=4.72%4=1.18% Interest rate per…

Q: Your bank account compounds interest monthly and has an annual percentage rate of 24 percent. What…

A: When the effects of compounding over time are considered, the effective annual interest rate is the…

Q: Suppose that a savings account attracts an interest rate of 1.6% per annum. How much would need to…

A: Present value means the current value of future money or cash flow given a specified rate of return.…

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: You are paying an effective annual rate of 8.974 percent on your credit card. The interest is…

A: Answer Effective Rate = (1 + Nominal Rate / n)n - 1 effective annual rate = 8.974% Number of…

Q: If a credit card charges 1½% interest every month, what are the nominal and effective interest rates…

A: The effective annual rate of interest is the real return on the savings account when the effects of…

Q: You have set a goal to save $ 10000 in a savings account that earns interest at 2.54% compounded…

A: Annuity due are the payments which are made at the beginning of the period.

Q: suppose that $6,300 is invested at 3.1% annual intrest rate, componded monthly. how much money will…

A: Future Value(FV) is value of current amount at future date. It is computed by compounding that…

Q: Suppose you deposit $125 on the first of every month for 240 months, and the bank credits interest…

A: The term annuity depicts a stream of equivalent periodic cash flows over a specific time duration.…

Q: You deposit $35,000.00 in an account that pays 6% compounded quarterly and immediately start making…

A: Amount Deposited = $ 35,000 Rate of Interest = 6% compounded quarterly

Q: Suppose that you start a savings account today with $ 265,000.00, from which you will make a single…

A: Since there are multiple questions As per company policy it is only possible to solve one question.…

Q: What is the effective annual interest rate in each situation? Show and explain all supporting…

A: Effective annual interest rate is the actual Interest which is paid or received by taking into…

Q: In order to have $373,010 in 29 years, how much needs to be deposited each month into a bank account…

A: Information Provided: Future value = $373,010 Years = 29 Interest rate = 1.1% compounded monthly…

Q: Suppose that $6,000 is placed in a bank account at the end of each quarter over the next 10 years.…

A: Quarterly payment (Q) = $6000 n = 10 years = 40 quarters Interest rate = 13%

Q: Suppose that $500 is deposited at the end of every quarter for 6 years in an account that pays 8%…

A: To calculate the value of the annuity, we can either use excel or fv calculator where R= RATE OF…

Q: Suppose you run up a debt of $300 on a credit cardthat charges an annual rate of 12 percent,…

A: Compound interest is the addition of interest to the principal sum of a loan or deposit, or in other…

Q: Suppose you have received a credit card offer from a bank that charges interest at 1.1% per quarter,…

A: The nominal rate is the rate that the financial institution quotes when giving out or receiving…

Q: If you put $6,000 in a savings account that yields an 1% rate of interest compounded daily, what…

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

Concept explainers

Mortgages

A mortgage is a formal agreement in which a bank or other financial institution lends cash at interest in return for assuming the title to the debtor's property, on the condition that the obligation is paid in full.

Mortgage

The term "mortgage" is a type of loan that a borrower takes to maintain his house or any form of assets and he agrees to return the amount in a particular period of time to the lender usually in a series of regular equally monthly, quarterly, or half-yearly payments.

Question

Suppose that you make quarterly deposits into a savings account that earns 8% interest compounded monthly. Compute the effective interest rate per quarter.

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

Trending now

This is a popular solution!

Step by step

Solved in 2 steps

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

Your bank account compounds interest monthly and has an annual percentage rate of 24 percent. What is the effective annual rate?
Suppose you put $250 at the beginning of every month in a savings account that credits interest at the annual rate of 6%, but compounds it monthly. Find the amount in this account after 25 years.
What would be the annual percentage yield for a savings account that earned $60.00 in interest on $1,000 over the past 365 days?
Suppose you deposit $1,250 at the end of each quarter in an account that will earn interest at an annual rate of 10 percent compounded quarterly. How much will you have at the end of four years?
Suppose you decide to deposit $24,000 in a savings account that pays a nominal rate of 12%, but interest is compounded daily. Based on a 365-day year, how much would you have in the account after four months? (Hint: To calculate the number of days, divide the number of months by 12 and multiply by 365.)
Suppose you have received a credit card offerfrom a bank that charges interest at 1.4% per month,compounded monthly. What is the nominal interest(annual percentage) rate for this credit card? What isthe effective annual interest rate?
You invest $5,000 into a money market account that pays interest monthly (e.g., interest is compounded monthly). After three-year the value of the account is $6,800. What is the annual and monthly interest rate?
You are paying an effective annual rate of 15.33 percent on your credit card. The interest is compounded monthly. What is the annual percentage rate on this account?
In the given qustion as follows , consider making monthly deposits of P dollars in a savings account at an annual interest rate r. find the balance A in the account after t years when the interest is compounded (a) monthly and (b) continuously. se the question as attached here
I. Suppose that you start a savings account today with $ 265,000.00, from which you will make a single withdrawal for $ 180,000.00 within 15 months. Determine how much money you will have in the account in 3 years if the account pays interest as follows: In the first 6 months at a rate of 5% quarterly compounded continuously; in the next 9 months at an interest rate of 16% per annum compounded quarterly; and in the remaining months at a simple interest rate of 2% effective monthly. Also determine the total interest the account earns during those 2 years. MAKE A CASH FLOW CHART. II.Consider now that the account referred to in Problem I pays effective monthly compound interest at a constant rate from the opening of the account onwards. Then determine the numerical value of the rate that would produce the same effect on the account as that obtained from the way interest is paid in Problem I.
You are making $200 monthly deposits into a savings account that pays interest at a nominal rate of 3% per year, compounded monthly. What is the future equivalent value of this account after five years?
Suppose 500$ is initially placed in savings account and 500$ is deposited at the end of every month for the next year. If interest is at 6% compounded monthly, how much is in the account at the end of the year?