The client has made a deposit in the bank in the amount of 10,000$. The duration of
Question:
The client has made a deposit in the bank in the amount of 10,000$. The duration of the deposit is 3 years. The interest rate on the deposit is 8% with quarterly capitalization.
a) Please calculate how much the customer has earned on this deposit? (2 points)
b) Please calculate the effective interest rate for this deposit? (2 points)
c) What was the real interest rate for this deposit if inflation was 2% per annum? (1 point)
d) If the customer would like to systematically save in an equal amount (instead of making a deposit at the beginning), how much he/she would have to pay into the deposit quarterly at the end of the quarter to have the same return on investment as in point a) - the interest rate is the same as in point a) . (2 points)
e) Would an investment in shares, for the same period, bought initially at 120$ and then sold at 130$, bring a higher or lower profit rate than the above investment. Note the shares paid a dividend of 6.80 $ annually at the end of each the year
Financial Accounting an introduction to concepts, methods and uses
ISBN: 978-0324789003
13th Edition
Authors: Clyde P. Stickney, Roman L. Weil, Katherine Schipper, Jennifer Francis