You are interested in investing your money in a bank account. Which of the follo

Question

You are interested in investing your money in a bank account. Which of the following banks provides you with the highest effective rate of interest? (5p) a. Bank 3; 8.0% with quarterly compounding. b. Bank 4; 8.0% with daily (365-day) compounding. c. Bank 5; 8.2% with annual compounding. 16) Suppose you have $2,000 and plan to purchase a 3-year certificate of deposit (CD) that pays 4% interest, compounded annually. How much will you have when the CD matures? (10p) a. $2,324.89 b. $2,591.45 c. $2,249.73 17) How much would $10,000 due in 100 years be worth today if the discount rate were 10%? (10p) a. $0.73 b. $1.21 c. $2.49

Explanation / Answer

b. $1.21

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