period The number of compounding periods in one year is called compounding affects both the present and future values of cash flows An investor can invest money with a particular bank and earn a stated interest rate of 6.60%; however, interest wil be compounded quarterly. What are the nominal, periodkc, and effective interest rates for this investment Periodic rate You want to invest $16,000 and are looking for safe investment options. Your bank is offering you a certificate of deposit that pays a nominal rate of 6% that is compounded quarterly, what is the effective rate of return that you 5.995% 6.221% 6.136% Suppose you deode to deposit S161000 in a sanngs account that pays a nominal rate of 14%, but interest is compounded daily. Based on a 365-day year, how much would you have in the account after nine months? (Hint: To calculate the number of days, divide the number of months by 12 and multiply by 365.) O $18,126.78 O $17,771.35 $17,593.64 O $17,238.21 O Type here to search 7. Present value of annuities and annuity payments The present value of an annuity is the sum of the discounted value of all future cash flows. You have the opportunity to invest in several annuities. Which of the following 10-year annuities has the present value (PV)? Assume that all annuities earn the same positive interest rate greatest O An annuity that pays $s00 at the end of every six months O An annuity that pays $1,000 at the end of each year O An annuity that pays $500 at the beginning of every six m O An annuity that pays $1,000 at the beginning of each year An ordinary annuity selling at $13,740.56 today promises to make equal payments at the end of each year for the next four years (N). If the annuity's appropriate interest rate (1) remains at 5.00% during this time, the annual annuity payment (PMT) will be You just won the lottery. Congratulations! The jackpot is $10,000,000, paid in four equal annual payments. The first payment on the lottery jackpot will be made today. In present value terms, you really won assuming annual interest rate of 5.00%