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Question
Your bank offers a 10-year certificate of deposit (CD) that pays 6.5% interest, compounded annually. If you invest $2,000 in the CD, how much will you have when it matures?a. $3,754.27
b. $3,941.99
c. $4,139.09
d. $4,346.04
e. $4,563.34
Answer
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Suppose that you're planning a vacation and borrow $2,000 from a bank for one year at a stated annual interest rate of 14 percent, with interest prepaid (a discounted loan). Also, assume that the bank requires you to maintain a compensating balance equal to 20 percent of the initial loan value. What effective annual interest rate are you being charged?a. 14.00%b. 8.57%c. 16.28%d. 21.21%e. 28.00%
Q:
Which of the following is not correct for a firm with seasonal sales and customers who all pay promptly at the end of 30 days?
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d. The level of accounts receivable at the end of each quarter will be the same.
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a. True
b. False