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Jim makes a deposit of $ 1 2 , 0 0 0 in a bank account. The deposit is to earn interest compounded annually at
Jim makes a deposit of $ in a bank account. The deposit is to earn interest compounded annually at the rate of percent for
seven years.
Required:
a How much will Jim have on deposit at the end of seven years? Hint: What is future value?
Note: Do not round intermediate calculations and round your final answer to the nearest whole dollar amount.
b Assuming the deposit earned a percent rate of interest compounded quarterly, how much would he have at the end of seven
years?
Note: Do not round intermediate calculations and round your final answer to the nearest whole dollar amount.
c What is the effective annual yield for alternative a where interest is compounded annually? Hint: Consider the future value of each
deposit after one year only.
Note: Do not round intermediate calculations and enter your answer as a percent rounded to decimal places.
c What is the effective annual yield for alternative b where interest is compounded quarterly? Hint: Consider the future value of
each deposit after one year only.
Note: Do not round intermediate calculations and enter your answer as a percent rounded to decimal places.
c Which alternative is better?
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