Old Time Savings Bank pays 3% annual interest rate on its savings accounts. If y

Question

Old Time Savings Bank pays 3% annual interest rate on its savings accounts. If you deposit $2,700 in the bank and leave it there. Assume bank pays compounded interest. How much interest will you earn in the first year? How much interest will you earn in the second year? How much interest will you earn in the 10th year? A) $81 ;$83.43:$ 105.69 C) $81:$81;$105.69 B) $81 ;$83.43;$108.86 D) $81:$81;$108.86 1 you earn 8% peryear on your ba nk account, how long will it take an account wit $250 to double to $5002(8% is annual interest rate and given annual compounding A) 7.27 B) 9.01 C) 5.89 D) 12.58 hat is the present value of the following cash-flow stream if the interest rate is 6%? You receive 200 at the end of first year, 100 at the end of second year, and 150 at the end of third year. (600 is annual interest rate and given annual compounding) A) 137.37 B) 423.45 C) 359.12 D) 403.62 Which one of the following arguments is correct? A) NYSE (NEW YORK STOCK EXCHANGE) is considered as financial market. B) Investment banks raise money from depositors and make loans to individuals and businesses ) Financing for public corporations must flow through financial institutions. Hedge funds provide small investors with low-cost diversification Which one of the following arguments is correct? A) The reinvestment of cash back into the firm's operations is an example of a flow B) An individual can save and invest in a corporation only by purchasing additional C) Hedge fund managers, unlike mutual fund managers, do not receive D) Stock and bond are intangible assets of savings to investment shares fund-performance-related fees

Explanation / Answer

1) In First year, I = 2700*0.03 = $81

In Second Year = 81 + 81*0.03 = $83.43

In 10th year = 2700*(1.03^10 - 1.03^9) = $ 105.69

Ans is A)

2) 2 = (1.08)^n

n = 9.01 years

Ans is B)

3) 200/1.06 + 100/1.06^2 + 150/1.06^3 = 403.62

Ans is D)

4) A

5) A

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