(3) a) An investor deposits $10,000 in a savings account that earns 4.5% simple
ID: 1231855 • Letter: #
Question
(3) a) An investor deposits $10,000 in a savings account that earns 4.5% simple interest a year. How many years will it take to double the balance in the account?b) If the investor has an alternative plan to place the deposit in an account that earns 4.2% interest compounded quarterly, how many years will it take to double the deposited fund?
c) Examine, using appropriate graphical illustration, how each of the following affects either nominal or real interest rate:
(i) A decrease in money supply by the FED.
(ii) A strong demand for investment goods
Explanation / Answer
a. 20000 = 10000(1.045)ˆn get n b. 20000 = 10000(1 + .042/4)ˆn get n.. this is n compounding periods answer will be n/4 years Please rate appreciated
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