Number 3

Use the following scenario to answer questions 1-4 You are planning to open a savings account after you slipped in a local Walmart. After an arduous legal battle, you were awarded $20,000 as a legal settlement that you plan to just sit in a savings account until you need it after you finish college in 4 years. The local banks are currently offering a few different party fictional) savings accounts as follows: Wesbanco is offering an account with 8.8% annual interest b. Huntington is offering an account with 8.6% quarterly interest c. PNC is offering an account with 8.5% monthly interest d. Chase is offering an account with 8.4% daily interest (n=365) 1. For each option above, show how much money you would have at the end of the 4-year period AND Decide which account would be the best one to choose. (You must show your work to receive credit) 2. We now have a new question. You are considering going to grad school and therefore won't need the money as soon as you thought. You instead would like to treat yourself after grad school to a new car that would cost about $40,000. So, now you are more interested in learning how long it would take for your $20,000 investment to double in value. For the options above, find the time it takes for the $20,000 investment to double. Decide which option is the WORST. (you must show your work to receive credit) 3. Let's consider another option to compare investments. Instead of using the APR (annual percentage rate) that most banks outline (and are given above), A more straight-forward way of comparing investments is using what is called the APY (annual percentage yield) APY = (1+)-1 This APY is how much you will cam as a percentage of your balance. (for example, an account with an APR of 5% compounded daily has an APY = (1 + - 1 = 0.0512675 - 5.13% annual return. Meaning, in this account, each year, we will gain 5.13% of our current balance) Use the APY formula above for the four bank accounts. Which has the best APY? Does this agree with your conclusion from 11 and 12? Why or why not for each? 4. We found a new account at Wellsfargo that compounds their interest semi-monthly (twice per month). The manager of the bank is flexible on the interest rate. We want to double our money in 8 years. What interest rate would be needed to double our $20,000 investment in 8 years? (you must show your work to receive credit) Use the following scenario to answer questions 1-4 You are planning to open a savings account after you slipped in a local Walmart. After an arduous legal battle, you were awarded $20,000 as a legal settlement that you plan to just sit in a savings account until you need it after you finish college in 4 years. The local banks are currently offering a few different party fictional) savings accounts as follows: Wesbanco is offering an account with 8.8% annual interest b. Huntington is offering an account with 8.6% quarterly interest c. PNC is offering an account with 8.5% monthly interest d. Chase is offering an account with 8.4% daily interest (n=365) 1. For each option above, show how much money you would have at the end of the 4-year period AND Decide which account would be the best one to choose. (You must show your work to receive credit) 2. We now have a new question. You are considering going to grad school and therefore won't need the money as soon as you thought. You instead would like to treat yourself after grad school to a new car that would cost about $40,000. So, now you are more interested in learning how long it would take for your $20,000 investment to double in value. For the options above, find the time it takes for the $20,000 investment to double. Decide which option is the WORST. (you must show your work to receive credit) 3. Let's consider another option to compare investments. Instead of using the APR (annual percentage rate) that most banks outline (and are given above), A more straight-forward way of comparing investments is using what is called the APY (annual percentage yield) APY = (1+)-1 This APY is how much you will cam as a percentage of your balance. (for example, an account with an APR of 5% compounded daily has an APY = (1 + - 1 = 0.0512675 - 5.13% annual return. Meaning, in this account, each year, we will gain 5.13% of our current balance) Use the APY formula above for the four bank accounts. Which has the best APY? Does this agree with your conclusion from 11 and 12? Why or why not for each? 4. We found a new account at Wellsfargo that compounds their interest semi-monthly (twice per month). The manager of the bank is flexible on the interest rate. We want to double our money in 8 years. What interest rate would be needed to double our $20,000 investment in 8 years? (you must show your work to receive credit)