1. When is an appropriate situation to use the formula FV = PV(1 + i,)(1 +...

  

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1. When is an appropriate situation to use the formula FV = PV(1 + i,)(1 + i2)...(1 + in)? Strip bond calculations A GIC with various interest rates The real rate of return with index numbers QUESTION 2 1. Which one of the following true about bonds and strip bonds? The periodic interest rate does not affect the calculation for strip bonds. A strip bond has the face value as the principal. A strip bond does not have regular interest payments where regular bonds do. 2. What is not one way of comparing GIC interest rates? o Compare the values of the interest rates in whichever format it is given in (nominal, periodic, etc.). o The highest interest rate value will be the better option. o Calculate the effective interest rate for all options. o The highest effective interest rate will be the better option. o Find the future value of all options based on a set principal. o The highest future value will be the better option. 3. Three consecutive years provide interest rates of 1%, 2%, and 3%. An equivalent annual interest rate that could be given each to year to receive the same amount is 2%. True O False 1. Two institutions offer the following rates: A: 5% effective interest rate B: 5% compounded annually Which statement is true? Institution B has the higher interest rate for one year. They both offer equal interest rates for one year. Institution A has the higher interest rate for one year 1. When is an appropriate situation to use the formula FV = PV(1 + i,)(1 + i2)...(1 + in)? Strip bond calculations A GIC with various interest rates The real rate of return with index numbers QUESTION 2 1. Which one of the following true about bonds and strip bonds? The periodic interest rate does not affect the calculation for strip bonds. A strip bond has the face value as the principal. A strip bond does not have regular interest payments where regular bonds do. 2. What is not one way of comparing GIC interest rates? o Compare the values of the interest rates in whichever format it is given in (nominal, periodic, etc.). o The highest interest rate value will be the better option. o Calculate the effective interest rate for all options. o The highest effective interest rate will be the better option. o Find the future value of all options based on a set principal. o The highest future value will be the better option. 3. Three consecutive years provide interest rates of 1%, 2%, and 3%. An equivalent annual interest rate that could be given each to year to receive the same amount is 2%. True O False 1. Two institutions offer the following rates: A: 5% effective interest rate B: 5% compounded annually Which statement is true? Institution B has the higher interest rate for one year. They both offer equal interest rates for one year. Institution A has the higher interest rate for one year

Answer rating: 100% (QA)

1 A GIC with various interest rates 2 A strip bond does n... View the full answer