Q1: Find the effective annual rate of interest (as a %, 2 decimal places) at which an amount of $2,000 today will accumulate to $6000 in 8 years. (Solve using excel =RATE function; Answer in percentage rounded to two decimals without the % sign e.g. 1.8891 is 1.89)

Q2:

Which of the following is CORRECT? When discounting an amount to be received in one years' time at a rate that is quoted as 12% compounding quarterly, we can:

Select one:

A. Discount the amount using an effective monthly rate of 1% where the number of periods is 12.

B. Discount the amount using an effective annual rate (EAR) of (1+0.01)^12-1 =12.6825% where number of periods is 1.

C. Discount the amount using the annual rate of 12% where number of periods is 1.

D. Discount the amount using the effective quarterly rate of 3% where the number of discount periods is 4.