Ques. 27) Your bank account pays a 6% nominal rate of interest. The interest is

Question

Ques. 27) Your bank account pays a 6% nominal rate of interest. The interest is compounded quarterly. Which of the following statements is CORRECT?
a. The periodic rate of interest is 1.5% and the effective rate of interest is 3%.
b. The periodic rate of interest is 6% and the effective rate of interest is greater than 6%.
c. The periodic rate of interest is 1.5% and the effective rate of interest is greater than 6%.
d. The periodic rate of interest is 3% and the effective rate of interest is 6%.
e. The periodic rate of interest is 6% and the effective rate of interest is also 6%.

Ques. 28) Suppose an ExxonMobil Corporation bond will pay $4,500 ten years from now. If the going interest rate on safe 10-year bonds is 4.25%, how much is the bond worth today?
a. $2,819.52
b. $2,967.92
c. $3,116.31
d. $3,272.13
e. $3,435.74

Explanation / Answer

27) periodic rate of interest = 6%/4 = 1.5%

effective rate of interest = (1+0.015)4 - 1 = 6.14%

answer is c)

28)

discounted present value = future value / (1+i)n

= 4500 / (1+0.0425)10 = 2967.92

answer is b)

Related Questions

Navigate

• Browse (All)
• Browse Q
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.