1) Starting to invest early for retirement increases the benefits of compound interest? Explain. a) True b) False 2) If a bank compounds saving accounts quarterly, the nominal rate will not exceed the effective annual rate? Explain. a) True b) False 3) As a result of compounding, the effective annual rate on a bank deposit(or a loan) is always equal to or greater than the nominal rate on the deposit (or loan)? Explain. a) True b)False 4) A U.S Treasury bond will pay a lump sum of $ 1,000 exactly 3 years from today. The nominal interest rate is 6%, semiannual compounding. Which of the following statements is CORRECT? Explain. a)The periodic interest rate is greater than 3%. b)The periodic interest rate is less than 3%. c)The present value would be grater if the lump sum were discounted back for more period. d)The present value of the $ 1,000 would be smaller if interest were compounded monthly rather than semiannually. e)The present value of the $ 1,000 lump sum has a higher present value than the present value of a 3-year, $333.33 ordinary annuity. 5)Which of the following bank accounts has the lowest effective annual return? Explain. a) An account that pays 8% nominal interest with monthly compounding. b) An account that pays 8% nominal interest with annual compounding. c) An account that pays 7% nominal interest with daily (365-day) compounding. d) An account that pays 7% nominal interest with monthly compounding. e) An account that pays 8% nominal interest with daily (365-day) compounding. 6)Suppose you just won the state lottery, and you have a choice between receiving $2,550,000 today or a 20-year annuity of $250,000, with the first payment coming one year from today. What rate of return is built into the annuity? Disregard taxes. Explain. a) 12% b) 49% c) 87% d) 26% e) 67% f) 50% 7) Suppose Community Bank offer to lend you $10,000 for one year at a nominal annual rate of 8%, but you must make interest payments at the end of each quarter and then pay off the $10,000 principle amount at the end of the year. What is the effective annual rate on the loan? Explain. a) 24% b)45% c) 66% d) 88% c)10% 8) Your bank offers to lend you $100,000 at an 8.5% annual interest to start your new business. The terms require you to amortize the loan with 10 equal end-of-year payments. How much interest would you be paying in Year 2? Explain. a) $7, 531 b) $7,927 c) $8,323 d) $8,740 e) $9,177