Valued using annual effective interest rate

Assignment Help Financial Management

Reference no: EM131963755

1. Wanda and Claire each openup new bank accounts at time 0.

Wanda deposits 1,000 into her bank account, and Claire deposits $700 into hers. Each account earns the same nominal annual interest rate compounded monthly.

The amount of interest earned in Wanda's account during the 11th year is equal to X. The amount of interest earned in Claire's account during the 15th year is also equal to X. Calculate X.

A) 18.19

B) 18.96

C) 218.31

D) 227.50

E) 761.69

2. A retailer is having a sale and allows its customers to choose between the following 2 options:

i) The customer can pay 92% of the purchse price in 9 months, or

ii) the customer can pay now and take X% off the purchase price

A customer is indifferent between the 2 choices when they are valued using an annual effective interest rate of 7%.

A) 3.2

B) 4.9

C) 8.7

D) 12.6

E) 14.0

Reference no: EM131963755

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