Which do you prefer a bank account that pays 45% per year (EAR) for three years

ID: 2821895 • Letter: W

Question

Which do you prefer a bank account that pays 45% per year (EAR) for three years or a. An account that pays 2.1% every six months for three years? b. An account that pays 7.6% every 18 months for three years? c. An account that pays 0.69% per month for three years? (Note: Compare your current bank EAR with each of the three alternative accounts. Be careful not to round any intermediate steps less than six decimal places.) If you deposit $1 into a bank account that pays 45% per year for three years. The amount you will receive after three years is SRound to five decimal places) a. An account that pays 2.1% every six months for 3 years? If you deposit $1 into a bank account that pays 2.1% every six months for three years. The amount you will receive after three years is (Round to five decimal places.) Which bank account would you prefer? b. An account that pays 76% every 18 months for 3 years? If you deposit $1 into a bank account that pays 76% every 18 months for three years. The amount you will receive after three years is $ (Round to five decimal places.) Which bank account would you prefer? C. An account that pays 0.69% per month for three years? If you deposit $1 into a bank account that pays 069% per month for three years . (Select from the drop-down menu.) V(Select from the drop-down menu.)

Explanation / Answer

the amount after three years at 4.5%=1*(1+4.5%)^3=1.14117

the amount after three years at 2.1% every six months=1*(1+2.1%)^(3*2)=1.13280

I will prefer bank account with EAR of 4.5%

the amount after three years at 7.6% every 18 months=1*(1+7.6%)^(36/18)=1.15778

I will prefer bank account with 7.6% every 18 months

the amount after three years at 0.69% per month =1*(1+0.69%)^(3*12)=1.28088

I will prefer bank account with 0.69% per month

the above is answer..

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Which do you prefer a bank account that pays 45% per year (EAR) for three years

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