Bank A offers a 2-year certificate of deposit (CD) that pays 10 percent compounded annually. Bank B offers a 2-year CD that is compounded semi-annually. The CDs have identical risk
What is the stated, or nominal, rate that Bank B would have to offer to make you indifferent between the two investments?
A) 9.67%
B) 9.76%
C) 9.83%
D) 9.87%
E) 9.93%
B
Business
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If you deposit $1,000 in an account that compounds quarterly at 8 percent interest, the interest
earned on your account at the end of 5 years will be A) $104.10. B) $485.90. C) $469.30. D) $661.00.
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Pacific Motors Inc. plans to issue $3,000,000 of commercial paper with a 6-month maturity at 98% of par value. What is the EAR?
A) 4.12% B) 4.08% C) 4.00% D) 2.00%
Business