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FRL 300 HW 2

# FRL 300 HW 2 - FRL 300 HW#2 Student 1 Compound Bank pays...

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FRL 300 HW #2 Student: ______________________________________________________________________ 1. Compound Bank pays interest of 4 percent compounded annually. Simple Bank pays 4.25 percent simple interest. Which one of the following statements is true if you invest \$1,000 in each bank for 6 years? A. Compound Bank will pay you a total of \$264.86 in interest over the 6 years. B. Simple Bank will pay you \$10.32 more in interest over the 6 years than Compound Bank will. C. Simple Bank will pay you a total of \$255 in interest over the 6 years. D. Simple Bank will pay you \$8.68 less in interest than Compound Bank over the 6 years. 2. Steve wants to make one lump sum deposit today so that he can have \$650,000 twenty-five years from now. He can earn 6.5 percent, compounded annually. How much must he deposit today? 3. Samantha has \$4,308 saved today. She wants to go on vacation as soon as she has \$5,000 saved. How long does she have to wait for her vacation if she earns 3.75 percent compounded annually? 4. Delta Construction currently pays an annual dividend of \$1.10 per share. At what rate must the company increase its dividend if it wants to pay \$1.50 a share three years from now?

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