Business, 27.03.2020 19:20 gibbss80stu

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.

Zoe deposited $900 in a savings account at her bank. Her account will earn an annual simple interest rate of 7%. If she makes no additional deposits or withdrawals, how much money will she have in her account in thirteen years?

a. $1,719.00

b. $2,168.86

c. $967.41

d. $163.00

Now, assume that Zoe's savings institution modifies the terms of her account and agrees to pay 7% in compound interest on her $900 balance. All other things being equal, how much money will Zoe have in her account in thirteen years?

a. $963.00

b. $151.82

c. $2,168.86

d. $1,719.00

Suppose Zoe had deposited another $900 into a savings account at a second bank at the same time. The second bank also pays a nominal (or stated) interest rate of 7% but with quarterly compounding. Keeping everything else constant, how much money will Zoe have in her account at this bank in thirteen years?

a. $166.16

b. $964.67

c. $163.00

d. $2,218.36

Answers: 2

Show answers

Another question on Business

Business, 22.06.2019 07:00

Pennewell publishing inc. (pp) is a zero growth company. it currently has zero debt and its earnings before interest and taxes (ebit) are $80,000. pp's current cost of equity is 10%, and its tax rate is 40%. the firm has 10,000 shares of common stock outstanding selling at a price per share of $48.00. refer to the data for pennewell publishing inc. (pp). pp is considering changing its capital structure to one with 30% debt and 70% equity, based on market values. the debt would have an interest rate of 8%. the new funds would be used to repurchase stock. it is estimated that the increase in risk resulting from the added leverage would cause the required rate of return on equity to rise to 12%. if this plan were carried out, what would be pp's new value of operations? a. $484,359 b. $521,173 c. $584,653 d. $560,748 e. $487,805

Answers: 1

Answer

Business, 22.06.2019 21:30

Suppose that alexi and tony can sell all their street tacos for $2 each and all their cuban sandwiches for $7.25 each. if each of them worked 20 hours per week, how should they split their time between the production of street tacos and cuban sandwiches? what is their maximum joint revenue?

Answers: 3

Answer

Business, 23.06.2019 00:30

How much of your paycheck do you have immediate access to once you deposit it into your bank account a. all of it b. a portion of it c. none of it

Answers: 1

Answer

Business, 23.06.2019 00:50

Hubert manages a grocery store in a country experiencing a high rate of inflation. to keep up with inflation, he spends a lot of time every day updating the prices, printing new price tags, and sending out newspaper inserts advertising the new prices. his employees regularly deal with customer annoyance over the frequent price changes. this is an example of the of inflation.

Answers: 2

Answer

You know the right answer?

Simple versus compound interest

Financial contracts involving investments, mortgages, l...

Questions