An account at bank pays interest at nominal rate

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Reference no: EM131837395

1. An account at a bank pays interest at a nominal rate of 2% per year compounded monthly. What are

(i) the monthly, quarterly and yearly growth factors,

(ii) the monthly, quarterly and yearly interest rates,

(iii) the annual percentage rate (APR), on this account?

2. If you deposited $10,000 in the account described in question 1, what will the balance in the account be after 6 months, one year, two years and 3 years respectively?

How long will it take for this balance to reach (a) $11,000, (b) $12,000, and (c) $15,000 respectively?

3. Your Bigbank Visa credit card charges interest at a nominal yearly rate of 19.9% compounded daily. What are

(i) the daily, monthly, quarterly and yearly growth factors on outstanding balances on the card,

(ii) the daily, monthly, quarterly and yearly interest rates for the card,

(iii) the annual percentage rate (APR) for this card?

4. You have an outstanding balance of $10,000 on the Visa card described in question 3. You resolve not to charge any more purchases to the card and to make payments of $400 each month.

What will the outstanding balance be after 1, 2, 3 and 5 years respectively? How long will it take to pay off this debt completely?

5. After you missed making the first monthly payment on this card, Bigbank increased the interest rate to its penalty annual rate of 29.9% compounded daily. Repeat questions 3 and 4 with this interest rate.

6. An account at a bank pays interest at a rate of 0.25% per month. If $1000 is deposited in the account

(i) what will be the account balance be after 3, 6 and 12 months?

(ii) what are the quarterly and yearly interest rates,

(iii) the annual percentage rate (APR), on this account?

7. If you deposited $5,000 in the account described in question 6, How long will it take for this balance to reach (a) $5,500, or (b) $6,000, respectively?

8. What annual interest rate (APR) on a bank deposit of $5,000 would provide a balance of $5,400 after one year? If interest is compounded monthly on this account, what is the monthly interest rate for this account? What is the daily rate?

9. Your credit card charges interest at a nominal yearly rate of 19% compounded daily.

(i) What are the associated daily, monthly, quarterly and yearly interest rates.

(ii) What is the annual percentage rate (APR) for this card?

Reference no: EM131837395

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