18. You have $10,500 that you would like to invest. You have two choices: Saving

Question

18. You have $10,500 that you would like to invest. You have two choices: Savings Account A which sams 8% compounded annually or Savings Account B which earns 7.75% compounded semiannually. A) A because it has higher effective annual rate B) A because it has higher nominal (quoted) annual rate C) B because it has higher effective annual rate D) Bbecause it has higher nominal (quoted annual rate 19. Suppose you deposit S500 at the beginning of each year for the next five years in a bank where it will earn 6% compounded annual interest, how much will you have at the end of five years? A) $2,687.30 B) $2,818.55 CO $2,987.66 D) $3,000.00 E) $2,800.00 20 Last year Mike bought a share of Dallas Corporation common stock for $53. During the year he received dividends of $1.45. The stock is currently selling for S50. What rate of return did Mike earn during the year A) 1.7% B) 13.2% C) 4.1% D) 2.92%

Explanation / Answer

18)correct option is "A" - because "A" has a higher effective annual rate"

19)Future value = present value *FVAF@6%,5 years

                     = 500* 5.9753

                    =$ 2987.66

correct option is "C"

20)Rate of return = [(price of current year -price of previous year )+Dividend ]/Price of previous year

                       = [(50-53)+1.45]/53

                         =[-3+1.45]/53

                       =-1.55/53

                      =-.0292 or -2.92%

correct option is "D" - -2.92%

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