Question
1.A bank offers a one-year CD with an APR of 3%. If the interest rate is compounded continuously , what is the effective annual rate
1.A bank offers a one-year CD with an APR of 3%. If the interest rate is compoundedcontinuously, what is the effective annual rate of the CD?
a 3.045%
b 3.020%
c 3.055%
d 3.030%
2.A financial instrument just paid the investor $100last year. If the cash flow is expected to last forever and increase each year at 3%, and with a discount rate of 8%, what should be the price that you are willing to pay for this instrument?
a $2,060
b $1,250
c $2,090
d $2,000
3.A bank offers a one-year CD with an APR of 6%. If the interest rate is compoundedmonthly, what is the effective annual rate of the CD?
a 6.168%
b 6.183%
c 6.136%
d 6.090%
An insurer requires $400,000 to provide a guaranteed annuity of $50,000 per year for 10 years, with the first payment in one year. What is the rate of return on this annuity?
a 3.28%
b 6.28%
c 4.28%
d 5.28%
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