4. (a) Suppose Fannie Rich wants to put her money in the bank so that she could get $5,000 in 5 years; if the bank is willing to pay annual interest of 2% for that amount of money, what is the value of Fannies money today?

(b) Using the Rule of 72 and the rate of 2%, Fannie could probably have doubled her money in how many years?

5. (a) What is the difference between simple and compound interests rates?

(b) What would have been the simple interest on Fannies $5,000 if she had just deposited the money for 5 years at the rate of 2%?

(c) Alternatively, what would have been the compound interest if interest was paid twice a year?

(d) Suppose interest had been compounded semi-annually, would the effective annually rate (EAR) had been different? Why? Why is the EAR important?

Please try to answer all questions. Thank you!