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Unformatted text preview: (a) Compound interest at eﬀective annual rate 8% (b) Simple interest at annual rate 8% (c) Compound discount at eﬀective annual rate 8% (d) Simple discount at annual rate 8% Q7. Bank A pays interest at rate i (2) = 15%. Bank B pays interest compounded daily. What minimum nominal annual rate must Bank B pay in order to be as attractive as Bank A? Assume we have 365 days in one year. Q8. Consider a 4-year investment with an annual simple discount rate of 10%. Find the equivalent annual simple interest rate i over the same investment period. Q9. Suppose we have compound interest and an eﬀective monthly interest rate of 0.5%. Find equivalent rates i (12) , i , and d . Q10. If the eﬀective annual rate of discount is 8%, for how long do you need to invest a principal of $500 so that it will accumulate to $750? 1...
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This note was uploaded on 07/13/2011 for the course ACTSC 231 taught by Professor Chisholm during the Winter '09 term at Waterloo.
- Winter '09