You were considering depositing your savings in one of three banks, all of which pay 7% interest; bank Capital compounds annually, bank Daisani compounds semiannually, and bank CUM compounds daily. Explain which bank you would choose to deposit
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- Use the tables in Appendix B to answer the following questions. A. If you would like to accumulate $2,500 over the next 4 years when the interest rate is 15%, how much do you need to deposit in the account? B. If you place $6,200 in a savings account, how much will you have at the end of 7 years with a 12% interest rate? C. You invest $8,000 per year for 10 years at 12% interest, how much will you have at the end of 10 years? D. You win the lottery and can either receive $750,000 as a lump sum or $50,000 per year for 20 years. Assuming you can earn 8% interest, which do you recommend and why?You want to invest $25,000 and are looking for safe investment options. Your bank is offering you a certificate of deposit that pays a nominal rate of 4% that is compounded bimonthly (every two months). What is the effective rate of return that you will earn from this investment? 4.067% 4.188% 3.926% 4.152% Suppose you decide to deposit $25,000 in a savings account that pays a nominal rate of 4%, but interest is compounded daily. Based on a 365-day year, how much would you have in the account after six months? (Hint: To calculate the number of days, divide the number of months by 12 and multiply by 365.) $25,505.01 $26,015.11 $26,397.69 $24,739.86An 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.
- Read and analyze each given scenario and provide what is asked. Show your complete solutions. 1. It is now January 1, 20x8. Today you will deposit P100,000 into a savings account that pays 8%. a. If the bank compounds interest annually, how much will you have in your account on January 1, 20x9? b. What will your January 1, 20x9 balance be if the bank uses quarterly compounding? 2. It is now January 1, 2x16, and you will need P100,000 on January 1, 2x20. Your bank compounds interest at an 8% annual rate. How much must you deposit today to have a balance of P100,000 on January 1, 2x20? 3. If you deposited P200,000 in a bank account that pays 6% interest annually, how much will be in your account after five (5) years? 4. What is the present value of a security that will pay P290,000 in 20 years if securities of equal risk pay 5% annually? 5. What is the future value of a 5%, 5-year ordinary annuity that pays P8,000 each year? If this was an annuity due, what would be its…1. You have just received a bonus of $15,750 and are looking to deposit the money in a bank for 5 years. You have investigated the annual deposit rate of several Australian banks and collected the following information: Bank Annual rate Compounding frequency Commonwealth Bank of Australia 0.50% Monthly Westpac Banking Corporation 0.90% Quarterly Australia and New Zealand Banking Group 0.75% Daily National Australia Bank 0.80% Annually A. To determine which bank you should deposit your money in, calculate how much money you will earn at the end of 5 years at each bank. (round your answer to 2 decimal places). B. You understand that the more frequently interest is earned in each year, the more you will have at the end of your investment horizon. Is this always true? Discuss this statement considering your answer from the previous part.Your firm has an average receipt size of $155. A bank has approached you concerning a lockbox service that will decrease your total collection time by one day. You typically receive 5,700 checks per day. The daily interest rate is 0.018 percent. The bank charges a lockbox fee of $115 per day. What is the NPV of accepting the lockbox agreement? (Round your answer to 2 decimal places. (e.g., 32.16)) NPV $ What would the net annual savings be if the service were adopted? (Use 365 days a year. Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16)) Net annual savings $.
- Grand Opening Bank is offering a one-time investment opportunity for its new customers. A customer opening a new checking account can buy a special savings bond for $600 today, which the bank will compound at 8.5% for the next ten years. The savings bond must be held for at least five years, but can then be cashed in at the end of any year starting with year five. What is the value of the bond at each cash-in date up through year ten? (Use an Excel spreadsheet to solve this problem.)ABC Corporation receives checks from its customers. The total check value averages 700,000 each day. It takes an average of 5 days from deposits for these to clear the bank. If the bank offers to accelerate the 5-day clearing process to 3 days for a monthly fee of 600. If ABC can earn 4% investment income from excess cash, how much is the net annual benefits/cost of this bank offer?It is now January 1, 20x8. Today you will deposit P100,000 into a savings account that pays 8%.a. If the bank compounds interest annually, how much will you have in your account on January 1, 20x9?b. What will your January 1, 20x9 balance be if the bank uses quarterly compounding?2. It is now January 1, 2x16, and you will need P100,000 on January 1, 2x20. Your bank compounds interest at an 8% annual rate. How much must you deposit today to have a balance of P100,000 on January 1, 2x20?3. If you deposited P200,000 in a bank account that pays 6% interest annually, how much will be in your account after five (5) years?4. What is the present value of a security that will pay P290,000 in 20 years if securities of equal risk pay 5% annually?5. What is the future value of a 5%, 5-year ordinary annuity that pays P8,000 each year? If this was an annuity due, what would be its future value?
- You are saving to buy a $177,000 house. There are two competing banks in your area, both offering certificates of deposit yielding 6.2 percent. How long will it take your initial $94,000 investment to reach the desired level at First Bank, which pays simple interest? How long will it take your initial $94,000 investment to reach the desired level at Second Bank, which compounds interest monthly?Years to wait at first bank?Years to wait at a second bank?Your firm has an average receipt size of $60. A bank has approached you concerning a lockbox service that will decrease your total collection time by 2 days. You typically receive 8,500 checks per day. The daily interest rate is 0.02 percent. If the bank charges a fee of $190 per day, what is the NPV of the lockbox project? What would the net annual savings be if the service were adopted?Suppose you invested $50,000 into an account at a private bank that attracts annual interest of 20% using this formula A= Pe^rt . How long would it take to ensure it grows to become $88,000?
