FREE Trial
Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Suppose you have recently invested $3,000 in a 3-year Certificate of Deposit (CD) at Indiana Members Credit Union that has an Annual Percentage rate (APR)

Suppose you have recently invested $3,000 in a 3-year Certificate of Deposit (CD) at Indiana Members Credit Union that has an Annual Percentage rate (APR) -- a quoted rate of 3.75%. 


a) If the Effective Annual Rate (EAR) is the same as the Annual Percentage Rate (APR), how much will your investment be worth in 3 years? (3 points) 


b) Suppose the interest is compounded quarterly. What is the future value (after 3 years) of your investment? (3 points) What is the Effective Annual Rate (EAR)? (3 points) 


c) Suppose the interest is compounded monthly. What is the future value (after 3 years) of your investment? (3 points) What is the Effective Annual Rate (EAR)? 

Step by Step Solution

★★★★★

3.39 Rating (158 Votes )

There are 3 Steps involved in it

Step: 1

To solve this problem we need to use the formula for future value FV of an investment with compoundi... blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Contemporary Engineering Economics

Contemporary Engineering Economics

Authors: Chan S. Park

5th edition

136118488, 978-8120342095, 8120342097, 978-0136118480

More Books

Students also viewed these Finance questions

Question

The interest of a compound interest investment or loan can be computed with the formula I=AP (where A is given below) . The end amount of a compound interest investment or loan can be computed with...

Answered: 1 week ago

Question

★★★★★
1 What are the main components of personal financial planning? Solve What is the purpose of a financial plan? Solve Identify some common actions taken to achieve financial goals. How does a job...

Answered: 1 week ago

Question

★★★★★
2. Write a script called countLetters which prompts the user to enter a word. The script should then display the number of letters in the word. Your script should run as follows:- Please enter word...

Answered: 1 week ago

Question

★★★★★
A 25,000 kW turbo-generator is supplied with 128,000 kg/h of steam at 2.50 MPa and 400C when developing it rated load. There are actually extracted 10,400 kg h at 0.3 MPa and 8300 kg/h at 0.06 MPa....

Answered: 1 week ago

Question

★★★★★
In the previous example, illustrate the open ball of radius 1/2 about (2, 0). Use the Euclidean metric p2. The following result links the metric and order structures of real numbers (see exercise...

Answered: 1 week ago

Question

★★★★★
14. An organization can reduce the price for a product in several ways. Discounts can be based on volume, function, seasonality, or allowance.

Answered: 1 week ago

Question

★★★★★
=+b) Is the process out of control? Comment. M21_SHAR8696_03_SE_C21.indd 804 14/07/14 7:36 AM Exercises 805

Answered: 1 week ago

Question

★★★★★
A container of car antifreeze is supposed to hold 3785mL of the liquid. Realizing that fluctuations are inevitable, the quality-control manager of the Taconic Chemical Company wants to be quite sure...

Answered: 1 week ago

Question

★★★★★
Fairmount Inc., a developer of radiology equipment, has stock outstanding as follows: 14,000 shares of cumulative preferred 4% stock, $160 par, and 47,000 shares of $15 par common. During its first...

Answered: 1 week ago

Question

★★★★★
The Chickn-Pickn fast-food chain is considering how to expand its operations. Three types of retail outlets are possible: a lunch counter operation designed for office buildings in downtown areas, an...

Answered: 1 week ago

Question

★★★★★
Hazel, a solvent individual, owed $ 2 5 , 0 0 0 to her employer. In 2 0 2 3 the employer forgave the employee for her indebtedness. Hazel also borrowed $ 5 0 , 0 0 0 from her father to buy a house in...

Answered: 1 week ago

Question

★★★★★
All-A-Buzz makes three products from a joint production process using honey. Joint cost for the process for the year is $246,400. Per Unit Incremental Units of Selling Price Processing Final Sales...

Answered: 1 week ago

Question

★★★★★
You are the dealer in one of the reputable banks and one of your roles is related to trading and monitoring of changes in the derivative markets. You are interested in one stock for Bally...

Answered: 1 week ago

Question

★★★★★
Problem 5: Find an expression, in terms of the principal stresses , 2, and 3, for the magnitude 7 of the traction vector on an octahedral plane, that is, a plane whose normal makes equal angels with...

Answered: 1 week ago

Question

★★★★★
PART III Average rate of change of exponential functions near zero. (5) 1. Given f(x) = 2*, find the average rate of change of f(x) from x = 0 to x = 0.1, so that Ax = 0.1. Recall that the average...

Answered: 1 week ago

Question

★★★★★
Given the following cash flows of a project, Cash flow Year 0 -$100,000 Year 1 $50,000 Year 3 -$20,000 Year 5 $80,000 a) What is the NPV? List formula and input numbers, no calculation needed b) What...

Answered: 1 week ago

Question

★★★★★
Jackson Music is considering investing $725,000 in private lesson studios that will have no residual value. The studios are expected to result in annual net cash inflows of $115,000 per year for the...

Answered: 1 week ago

Question

★★★★★
Havel says the grocer doesnt believe what is on the sign and indeed, he says the grocers customers will barely notice it. But Havel maintains that the sign serves a specific function. How would you...

Answered: 1 week ago

Question

★★★★★
Kersey Manufacturing Co., a small fabricator of plastics, needs to purchase an extrusion molding machine for $120,000. Kersey will borrow money from a bank at an interest rate of 9% over five years....

Answered: 1 week ago

Question

★★★★★
Consider the cash flows in Table P6.1 and compute the equivalent annual worth at i = 10%. Investment Revenue -$10,000 $3,000 3,000 4,000 4,000 2.000 1,500 0. 3,000

Answered: 1 week ago

Question

★★★★★
Redo Problem 14.10 with the following additional information. For tax purposes, the entire cost of $15,000 can be depreciated according to a five-year MACRS property class. The firm's marginal tax...

Answered: 1 week ago

Question

★★★★★
Think about organizations in which you have worked, for whom you worked as consultants, or with which you are familiar. What barriers to the implementation of recommendations did you encounter? How...

Answered: 1 week ago

Question

★★★★★
Explain why the lines separating the three regions in Figure 5.11 all intersect at Point D.

Answered: 1 week ago

Question

★★★★★
The analysis of the Texaco-Pennzoil example shows that the EMV of counter offering with $5 billion far exceeds $2 billion. Why might Liedtke want to accept the $2 billion anyway? If you were Liedtke,...

Answered: 1 week ago

Previous Question Next Question