Reference no: EM132477360

Question 1: Find the future values of the following ordinary annuities:

a. FV of $400 paid each 6 months for 5 years at a nominal rate of 15% compounded semiannually. Do not round intermediate calculations. Round your answer to the nearest cent.

b. FV of $200 paid each 3 months for 5 years at a nominal rate of 15% compounded quarterly. Do not round intermediate calculations. Round your answer to the nearest cent.

c. These annuities receive the same amount of cash during the 5-year period and earn interest at the same nominal rate, yet the annuity in part b ends up larger than the one in part a. Why does this occur?

-Select-

1. The nominal deposits into the annuity in part (b) are greater than the nominal deposits into the annuity in part (a).
2. The annuity in part (a) is compounded less frequently; therefore, more interest is earned on previously-earned interest.
3. The annuity in part (a) is compounded more frequently; therefore, more interest is earned on previously-earned interest.
4. The annuity in part (b) is compounded less frequently; therefore, more interest is earned on previously-earned interest.
5. The annuity in part (b] is compounded more frequently; therefore, more interest is earned on previously-earned interest.

Question 2: Find the interest rates earned on each of the following. Round your answers to the nearest whole number.

a. You borrow $3350 and promise to pay back 5780 at the end of 1 year.

b. You land 5260 and the borrower promises to pay you $80 at the end of 1 year.

c. You borrow $83,000 and promise to pay back $249,336 at the end of 9 years.

d. You borrow $11,000 and promise to make payments of $3,359.50 at the end of each year for 5 years.