Quiz 3: Understanding Money Management

Business

Given information: • Interest rate per month is 1.25 percent. a.Nominal interest rate: Nominal interest rate can be calculated by using the following formula: img …… (1)Substitute the respective values in Equation (1) to calculate the nominal interest rate. img Hence, the nominal interest rate is img percent. b.Effective interest rate: Effective interest rate can be calculated by using the following formula: img …… (2)Where, i = Interest rate n = Time period Substitute the respective values in Equation (2) to calculate the effective interest rate. img Hence, the effective interest rate is img percent.

Given information: • Every month deposit is $1,000. • Compounded monthly interest rate is 6 percent. Hence, monthly interest rate is img . • Time period is 10 years. Hence, 120 months. Future value: Future value can be calculated by using the following formula: img …… (1)Where, i = Interest rate n = Time period Substitute the respective values in Equation (1) to calculate the future value of the cash flow. img img The future value of the cash flow is img . Hence, option (a) is the correct answer.

Given information: • Monthly compounded interest rate is 1.65 percent. a.Nominal interest rate: Nominal interest rate can be calculated by using the following formula: img …… (1)Substitute the respective values in Equation (1) to calculate the nominal interest rate. img Hence, nominal interest rate is img percent. b.Effective interest rate: Effective interest rate can be calculated by using the following formula: img …… (2)Where, i = Interest rate n = Time period Substitute the respective values in Equation (2) to calculate the effective interest rate. img Hence, effective interest rate is img percent.

There is no answer for this question

There is no answer for this question