ENG106W12_HW3-solution

# ENG106W12_HW3-solution - ENG 106 Homework#3 Solutions...

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ENG 106 Homework #3 Solutions Winter 2012 3.3 A California bank, Berkeley Savings and Loan, advertised the following information: interest 7.55% and effective annual yield 7.842%. No mention is made of the interest period in the advertisement. Can you figure out the compounding scheme used by the bank? (hint:you are given r and i a .) ι a = 7.842% and r = 7.55% The scheme is likely using a continuous compounding scheme. In continuous compounding, ι a = e r -1 = e^(0.0755)-1 7.842% 3.10 Find the effective interest rate per payment period for an annual interest rate of 9%, compounded monthly, for each of the given payment schedules: a) monthly i e = 9%/12 = 0.75% b) quarterly i e = (1 + 9%/12)^3 -1 = 2.267% c) semiannually i e = (1 + 9%/12)^6 -1 = 4.585% d) annually i e = (1 + 9%/12)^12 -1 = 9.381% 3.18 A series of equal quarterly payments of \$1,000 extends over a period of three years. It is desired to compute the future worth of this quarterly deposit series at 12% compounded monthly. Which of the equations shown is correct for this operation? a) F = 4(\$1000) (F/A, 12% , 3)

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ENG106W12_HW3-solution - ENG 106 Homework#3 Solutions...

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