You opened an investment account today. Five years from now, you are going to receive $10,000. Suppose that you do not make any withdrawals or additional payments throughout the life of your account. Interest of 10% is accumulated annually. Which of the following statement is true?' (a) Your initial deposit does not exceed 56,000 b) If your initial deposit was $5,000 and interest rate was 14%, you would have earned more than $10,000 after five years C) If the interest was compounded semiannually, you would get less than $10,000 by the end of year 5 (d) Your initial deposit is above 36,300 (e) If you hold your initial deposit at the same account for three more years, you are going to accumulate more than $13,000 Current market price of a perpetuity that pays $5 each year is $150. What is the rate of return required by the market? (a) 30.00% (b) 3.33% (c) 5.00% (d) 3.45% (e) Not possible to compute using only information given in the problem You want to borrow some money so you ask your bank for a loan. The banks gives you two options, which have the same terms except interest rate and compounding frequency. Loan A offers an annual rate of 5%, compounded weekly (there are 52 weeks in a year). Loan B offers an annual rate of 5.1%, compounded semiannually. Which loan should you select and why? (a) A, because EARA = 5.12% EARB = 5.17% (2) Loans are equivalent to you, because EARA = EARB = 5.12% You are thinking to borrow money from the bank. APR on the loan is 5%. What is highest EAR possible for this loan? (a) 5.13% 6) 5.12% (c) 5.08% (d) 5.00% () Not possible to answer using only information given in the