3. You have $ 29,653 today. How long would it take to grow to $ 84,744 if invest

Question

3. You have $ 29,653 today. How long would it take to grow to $ 84,744 if invested at 6.37%?

11.3 years

17.0 years

18.4 years

d. 21.0 years

Bob will loan you money at 8% interest compounded quarterly payments. Bob says it is cheaper than the bank's loan at 7.9% interest with compounded monthly payments. Is Bob correct?

Yes; Bob's effective rate of 8.38% is less than the bank's effective rate of 8.44%.

Yes; Bob's 8% rate is lower than the bank's 7.9% rate.

No; Bob's cost at 8% is less than the bank's cost at 7.9%.

No; Bob's effective rate of 8.24% is greater than the bank's effective rate of 8.19%.

a

11.3 years

b

17.0 years

c

18.4 years

2.

d. 21.0 years

Bob will loan you money at 8% interest compounded quarterly payments. Bob says it is cheaper than the bank's loan at 7.9% interest with compounded monthly payments. Is Bob correct?

Yes; Bob's effective rate of 8.38% is less than the bank's effective rate of 8.44%.

Yes; Bob's 8% rate is lower than the bank's 7.9% rate.

No; Bob's cost at 8% is less than the bank's cost at 7.9%.

No; Bob's effective rate of 8.24% is greater than the bank's effective rate of 8.19%.

Explanation / Answer

3. Answer b- 17 yrs. Using the compound interest formula Amount= Principal(1+interest rate)^no.of years Where Amount= 84744; Principal=29653; interest rate= 6.37 compounded annually Solving in an online financial calculator for no.of years n, we get n= 17 yrs.(most nearest answer among the options) 2. Answer d -No; Bob's effective rate of 8.24% is greater than the bank's effective rate of 8.19 For a loan of $1 Bob's effective rate of interest rate will be 1(1+ 0.08/4)^4= 1.0824 ie.8.24% (Interest rate compounded quarterly) Bank's effective rate of interest rate will be 1(1+ 0.079/12)^12= 1.0819 ie.8.19% (interest rate compounded monthly)

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