# Question

For each of the savings account transactions in the accompanying table on page 163, calculate the following.

a. End-of-year account balance. (Assume that the account balance at December 31, 2013, is 0.)

b. Annual interest, using 6% simple interest and assuming all interest is withdrawn from the account as it is earned.

c. True rate of interest, and compare it to the stated rate of interest. Discuss your finding.

a. End-of-year account balance. (Assume that the account balance at December 31, 2013, is 0.)

b. Annual interest, using 6% simple interest and assuming all interest is withdrawn from the account as it is earned.

c. True rate of interest, and compare it to the stated rate of interest. Discuss your finding.

## Answer to relevant Questions

Referring to Problem 4A.9, at what price would the bond sell if U.S. savings bonds were paying 4% interest compounded annually? Compare your answer to your answer to the preceding problem. Congratulations! You have won the lottery! Would you rather have $1 million at the end of each of the next 20 years or $15 million today? (Assume an 8% discount rate.) For each of the following initial investment amounts, calculate the future value at the end of the given investment period if interest is compounded annually at the specified rate of return over the given investment period. What is the capital asset pricing model (CAPM)? What role does beta play in the model? What is the risk premium? How is the security market line (SML) related to the CAPM? What is diversification? How does the diversification of risk affect the risk of the portfolio compared to the risk of the individual assets it contains?Post your question

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