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(a) Explain the differences between annual percentage rate (APR) and effective annual rate (EAR).
(b) Phoebe is considering selling her entire stock holding and depositing the money ($500,000 in total) into a bank account. She has obtained the following information about two banks:
Bank X: 12% APR with monthly compounding
Bank Y: 13% APR with semi-annual compounding
(i) Based on the comparison of the yearly
(ii) How much money will Phoebe have in Bank X’s account five years from now if the money remains in the account during the period? Provide supporting calculations.
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- (a) Explain the differences between annual percentage rate (APR) and effective annual rate (EAR). (b) Phoebe is considering selling her entire stock holding and depositing the money ($500,000 in total) into a bank account. She has obtained the following information about two banks: Bank X: 12% APR with monthly compounding Bank Y: 13% APR with semi-annual compounding (iii) How much money will Phoebe have in Bank X’s account if the interest earned is withdrawn at the end of each month to pay for living expenses of the following month? Explain (without calculation) in NO MORE THAN THREE LINES your answer. (iv) Explain the difference in the bank account balance in parts (ii) and (iii), with supporting calculations by showing the 5-year interest on principal, 5-year interest on interest and the total interest.Question 1 (a) Explain the differences between annual percentage rate (APR) and effective annual rate (EAR). (b) Phoebe is considering selling her entire stock holding and depositing the money ($500,000 in total) into a bank account. She has obtained the following information about two banks: Bank X: 12% APR with monthly compounding Bank Y: 13% APR with semi-annual compounding (i) Based on the comparison of the yearly rate of return, which bank would Phoebe prefer? Provide supporting calculations. (ii) How much money will Phoebe have in Bank X’s account five years from now if the money remains in the account during the period? Provide supporting calculations. (iii) How much money will Phoebe have in Bank X’s account if the interest earned is withdrawn at the end of each month to pay for living expenses of the following month? Explain (without calculation) in NO MORE THAN THREE LINES your answer. (iv) Explain the difference in the bank account balance in parts (ii) and (iii), with…There is an investor stating they will pay out $84,000 at the end of 4 years. In order to invest into the opportunity, you'll need to make a deposit of $10,000 to thier indicated bank account. What is the average annaul return rate. Use excel functions to indicate your steps.
- Assume that you are nearing graduation and have applied for a job with a local bank. As part of the bank's evaluation process, you have been asked to take an examination that covers several financial analysis techniques. The first section of the test addresses time value of money analysis. See how you would do by answering the following questions. Draw time lines for (a) a $2000 lump sum cash flow at the end of year 4, (b) an ordinary annuity of $1000 per year for 5 years, and (c) an uneven cash flow stream of -$450, $1000, $650, $850 and $500 at the end of years 0 through 4. What is the future value of an initial $1000 after 5 years if it is invested in an account paying 5% annual interest? What is the present value of $1000 to be received in 4 years if the appropriate interest rate is 5%? We sometimes need to find out how long it will take a sum of money (or anything else) to grow to some specified amount. For example, if a company's sales for 2020 is $1000 and expected to grow…An investor has accumulated $4,450 and is looking for the best rate of return that can be earned over the next year. A bank savings account will pay 9%. A one-year bank certificate of deposit will pay 11%, but the minimum investment is $7,450. Required: a. Calculate the amount of return the investor would earn if the $4,450 were invested for one year at 9%. b. Calculate the net amount of return the investor would earn if $3,000 were borrowed at a cost of 19%, and then $7,450 were invested for one year at 11%. c. Calculate the net rate of return on the investment of $4,450 if the investor accepts the strategy of part b. Note: Round your answer to 2 decimal places. a. Amount of return b. Net amount of return c. Net rate of return %Assume that you are nearing graduation and have applied for a job with a local bank. As part of the bank's evaluation process, you have been asked to take an examination that covers several financial analysis techniques. The first section of the test addresses time value of money analysis. See how you would do by answering the following questions. Draw time lines for: (a) a $2000 lump sum cash flow at the end of year 4, (b) an ordinary annuity of $1000 per year for 5 years, and (c) an uneven cash flow stream of -$450, $1000, $650, $850 and $500 at the end of years 0 through 4.
- A father wants to set up a bank account that will pay his daughter $12,000 at the end-of-quarter (EOQ) 4 and $24,000 at EOQ 8. He will fund this account by making quarterly payments of $A from the present (time zero) through EOQ 7. If the quarterly percentage rate is 2%, what is the value $A that must be deposited into the account? Please include equations used and cashflow diagramA father wants to set up a bank account that will pay his daughter $18,000 at the end-of-quarter (EOQ) 4 and $30,000 at EOQ 8. He will fund this account by making quarterly payments of $X from the present (time zero) through EOQ 7. a. Draw a cash-flow diagram from the father's viewpoint. b. If the quarterly percentage rate is (form number%), what is the value $X that must be deposited into the account?You are shopping around for different bank accounts and have found several different banking institutions offering different types of interest. Calculate the effective rate of return (also known as the annual percentage yield (APY)) of each bank account. Hint: rE = (1+ 5)" – 1 (Enter your answers as a percentage rounded to 2 decimal places.) (a) Wesbanco offers an account 7.28 % interest compounded daily. APY = Number (b) PNC offers an account with 7.29 % interest compounded weekly. APY = Number (c) United Bank offers an account with 7.25 % interest compounded monthly. APY = Number % (d) BB&T offers an account with 7.32 % interest compounded quarterly. APY = Number (e) Navy Federal offers an account with 7.34 % interest compounded semi-annually. APY = Number (f) Assuming our goal is to have the best return, which account should we choose? O Wesbanco O PNC O United Bank BB&T O Navy Federal
- Do the relevant calculations so you can indicate which you prefer: a bank account that pays 5.8% per year (EAR) for 3 years or a. an account that pays 2.6% every 6 months for 3 years? b. an account that pays 7.6% every 18 months for 3 years? c. an account that pays 0.58% per month for 3 years? (Note: Compare your current bank EAR with each of the three alternative accounts. Be careful not to round any intermediate steps less than six decimal places.) If you deposit $1 into a bank account that pays 5.8% per year for three years, the amount you will receive after three years is $ (Round to five decimal places.)If you deposited P1,000 a couple of years ago in a bank that pays the interest bimonthly. After that, the money in the account had grown to P1,800. Determine the nominal interest rate and the effective interest rate.You are shopping around to determine which bank account yields the highest return. You have three choices: 1st - Wesbanco offers an account compounded annually at 7.2% 2nd - PNC offers an account compounded semi-annually at 6.29% 3rd - United offers an account compounded daily at 6.5% You have $2,000 to invest for 1 years. Which account should you choose to have the largest account balance in 1 years? O Wesbanco United PNC Wesbanco will produce $ Number in 1 years. PNC will produce $ Number in 1 years. United will produce $ Number in 1 years. (round dollar values to the nearest cent (two decimal places))