Week 3 Question Bank

Find the nominal interest rate for:

1. 0.05% quarterly
2. 0.12% monthly
3. 0.004% daily
4. 0.06% weekly
5. 0.072% semi-annually

Find the periodic interest rate for:

1. 15% compounded quarterly
2. 18% compounded monthly
3. 12% compounded weekly
4. 5% compounded yearly
5. 26% compounded daily

Find the compounding frequency for:

1. 3 months compounding
2. 12 months compounding
3. 6 months compounding
4. 18 months compounding
5. 52 weeks compounding
6. 365 days compounding

1. Hope Dearborn invests $40,000 on January 1, 2007 in a savings account that earns interest of 8% compounded semi-annually. What will be the amount in the fund on December 31, 2012?
2. If you purchased a $10,000 certificate of deposit (CD) today with a nominal annual interest rate of 12%, with monthly compounding, what would be the CD worth when it matures in 6 years?
3. Find the following value for a lump sum assuming quarterly compounding:
   1. The future value of $500 invested at 8 percent for one year
   2. The present value of $1500 received after one year at 8 percent monthly compounded rate of interest
4. What is the balance in an account at the end of 9 years if $7,500 is deposited today and the account earns 2% interest compounded annually?
5. What is the future value at the end of 17 years of depositing $1,750 into a mutual fund today, assuming the fund is expected to earn 12% a year?
6. What is the future value of $1,400 in 20 years assuming an interest rate of 9.6 percent, compounded semiannually?
7. Calculate how much you would have in a savings account 5 years from now if you invest $1,000 today, given that the interest paid is 8 percent compounded annually.
8. Suppose that $2,000 is invested at a rate of 4.2%, compounded quarterly. Assuming that no withdrawals are made, find the total amount after 3 years.