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Question 1 (8.5 marks) Assume that one year from now you plan to deposit AED 25,000 in a savings account that pays a nominal rate
Question 1 (8.5 marks) Assume that one year from now you plan to deposit AED 25,000 in a savings account that pays a nominal rate of 6.4 percent. Question A (2 marks) If the bank compounds interest annually, how much will you have in your account five years from now? Question B (2.5 marks) What would your balance be five years from now if the bank used quarterly compounding rather than annual compounding? Question C (2 marks) Suppose that you deposited the AED 25,000 in five payments of AED 5,000 cach at the end of years I, 2, 3, 4 and 5. How much would you have in your account at the end of year 5, based on 6.4 percent annual compounding? Question D (2 marks) Suppose that you deposited five equal payments in your account at the end of years 1, 2, 3, 4 and 5. Assuming a 6.4 percent interest rate, how large would each of your payments have to be for you to obtain the same ending balance as you calculated in Question A
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