Author Question: Your company is able to arrange financing at either a rate of 12.75 annually, or at a rate of 12 ... (Read 59 times)

dollx · **on:** Jul 10, 2018

Your company is able to arrange financing at either a rate of 12.75 annually, or at a rate of 12
compounded monthly. Assuming financing is needed for one year, which rate is the best?

A) 12.75 annually, because the annual percentage yield for 12 compounded monthly is
greater than 12.75.
B) 12.75 annually, because even though the annual percentage yield is higher, interest if paid
only once per year at year end.
C) 12 compounded monthly, because the annual percentage yield is 12.68.
D) Both rates are effectively the same, so your company should be indifferent between the two.

Question 2

If 100 is placed in an account that earns a nominal 4, compounded quarterly, what will it be worth in 5 years?

A) 122.02
B) 105.10
C) 135.41
D) 120.90
E) 117.48

ashely1112 · **Reply #1 on:** Jul 10, 2018

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