Suppose that on Jan 1 you lend $50,000 to a bank (deposit $50,000 in a savings a

Question

Suppose that on Jan 1 you lend $50,000 to a bank (deposit $50,000 in a savings account). The savings account is paying 4% annual interest rate paid quarterly. a.) How much interest will be paid on April 1? What is the new account balance? (Hint: you will receive only a quarter of the annual interest) b.) How much interest is paid on July 1? What is the new account balance? c.) How much interest is paid on Oct 1? What is the new account balance? d.) How much interest is paid on Jan 1? What is the new account balance? e.) Use the simple interest rate formula: PV = FV/(1+i) to calculate the interest rate that you actually received. In banking jargon the 4% shown above is called the interest

Explanation / Answer

http://smallbusiness.chron.com/differences-between-interest-rate-yield-3648.html http://www.mycalculators.com/ca/yldcalculatorm.html

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