Oops! When you went in to make your deposit, the bank representative said the am
ID: 2814001 • Letter: O
Question
Oops! When you went in to make your deposit, the bank representative said the amount of required deposit reported in the advertisement was incorrect and should have read $15,000. This revision will (REDUCE or INCREASE) the interest rate earned on your deposited funds.
The change to your required deposit will cause your earned interest rate to change to (27.60%, 26.40%, 25.20%, 24.00%).
Perpetuities are also called annuities with an extended, or unlimited, life. Based on your understanding of perpetuities, answer the following questions: Which of the following are characteristics of a perpetuity? Check all that apply. A perpetuity continues for a fixed time period. O The principal amount of a perpetuity is repaid as a lump-sum amount. O In a perpetuity, returns-in the form of a series of identical cash flows-are earned. A perpetuity is a series of regularly timed, equal cash flows that is assumed to continue indefinitely into the future. A local bank's advertising reads: "Give us $10,000 today, and we'll pay you $3,600 every year forever." If you plan to live forever, what annual interest rate will you earn on your deposit? 32.40% O 57.60% 36.00% 43.20%Explanation / Answer
1)Correct option is :
C)In a perpetuity ,Returns in the form of a series of identical cash flows are earned .
D)A perpetuity is a series of regularly timed ,equal cash flows that is assumed to continue indefinitely in to future
2)Rate =annual cash flow /present value
= 3600 /10000
= .36 or 36%
correct option is "C"
3)Interest rate = 3600 /15000 = .24 or 24%
The Revision will reduce the interest rate .
The change to your required deposit will cause your earned interest rate to change to 24%
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