Which rate offers the lowest cost

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Reference no: EM131319877

-Suppose that you can subscribe to a magazine using either a one-year rate of $27, a two-year rate of $52, a three-year rate of $65, or a four-year rate of $100. If want to receive this magazine for four years and if your opportunity cost of funds is 8%, which rate offers the lowest cost?

a. A four-year subscription costing $100and paid immediately.

b. Four one-year subscriptions, of $27each, paid at the beginning of each year.

c. A two-year subscription paid immediately, costing $52, followed by another two-year subscription costing $52 and paid at the beginning of the third year.

d. A one-year subscription paid immediately, costing $27, followed by a three-year subscription costing $65and paid at the beginning of the second year.

e. There is not enough information provided to answer this question.

-It is now January 1. You plan to make 5 deposits of $300 each, one every6 months, with the first payment being made exactly six months from today. If the bank pays a nominal interest rate of 12% but uses semiannual compounding, how much will be in your account exactly 12 years from today?

-You must make a payment of $3,800 exactly 8 years from today. To prepare for this payment, you will make 5 equal deposits into an account that pays a nominal interest rate of 7.6% p.a., with quarterly compounding. If your first deposit is made today (and then you make four additional deposits in each of the next four quarters –that is, a deposit 3 months from today, another 6 months from today and so on), what must each of the 5 payments be for you to exactly achieve your goal?

Reference no: EM131319877

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