You deposit $100 in the bank and leave it there for two years. Your account earns 10% compounded annually. At the end of two years, how much is in your account? What would you do if a competitive bank offers you the same rate, but compounds monthly?
What will be an ideal response?
Option 1: Annual
PV - $100
I/Y - 10%
N - 2
Solve FV - $121.00
Option 2: Monthly
PV - $100
I/Y - 10/12%
N - 12*2
Solve FV - $122.04
Select the monthly option.
You might also like to view...
Which of the following is the best statement of a goal?
A. Give your very best effort. B. Get through most of those reports by 9/1. C. Reduce production errors by 10 percent by the end of the quarter. D. Increase customer retention. E. Be late to work less often.
A key indicator of fraud in the revenue cycle is the auditor's detection of which of the following?
a. Customer collections that are over 90 days past due. b. Credit entries in customer accounts receivable for authorized writeoffs. c. Recurring entries in the sales journal. d. Altered shipping documents and invoices.
Which of the following driving forces would have the least impact on the attractiveness of the automobile industry?
A. entry or exit of major firms B. changes in the long-term industry growth rate C. changes in costs and efficiency D. shifts in who buys the product and how the product is used E. regulatory influences and government policy changes
Everything else the same, if the yield curve is downward sloping, what is the yield to maturity on a 10-year Treasury coupon bond, relative to that on a one-year Treasury bond (T-bond)?
A. The yield on the 10-year bond is less than the yield on a one-year bond. B. The yield on a 10-year bond will always be higher than the yield on a one-year bond because of maturity premiums. C. It is impossible to tell without knowing the coupon rates of the bonds. D. The yields on the two bonds are equal. E. It is impossible to tell without knowing the relative risks of the two bonds.