Mutual funds charge an annual fee, called the expense ratio, that usually ranges from about 0.4% to about 1.4% of the amount of money in the account at the end of the year. For instance, if the expense ratio is 0.5% and there is $10,000 in the account at the end of the year, then there would be a charge of 0.005 10000 = $50 in fees. Suppose that John puts $7,000 at the beginning of each year into an IRA and that the funds are invested in a mutual fund earning 5% per year, before expenses. How much more will John have at the end of 12 years if the mutual fund has an expense ratio of 0.4%, as opposed to 1.4% ? John will have $more at the end of 12 years (Round to the nearest cent as needed.)
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- Suppose that the household, with the same P10,000 per month earnings, decides to deposit P3,333.33 in checking account and P6,666.67 in a bond fund. Assume that the bond fund pays 1.5% interest per month or an annual interest rate of 18% and that a month has 30 days. After 10 days the money in the checking account has been depleted and decides to pull from the bund fund another 10,000 and deposited into checking account to finance a 10-day expenses. How much is the average quantity of money it demands per month? * O P10,000 O P3333.333 PO P1500Allied Bank pays 4% interest compounded annually on deposits, while bonkers Bank pays 3.5% compounded daily.a. Based on the EAR which bank should you use?b. Could your choice of banks be influenced by the fact that you might want to with draw your funds during the year as opposed to at the end of the year? Assume that your funds must be left on deposit during an entire compounding period in order to receive any interest.A bank is offering a special deal. If you invest X now, the bank will give you 15,000 at time 7; 14,000 at time 8; 13,000 at time 9; and so on with the last payment being at time 14. Using an annual effective interest rate of 8%, determine X.
- You plan to invest $10,000 for 180 days. Your bank offers a rate of 2.60% on 90-day GICS and 2.85% on 180-day GICS. How much more interest will you earn if you purchase a single 180-day GIC instead of two consecutive 90-day GICS? Remember that the interest earned from the first 90-day GIC will be invested in the second 90-day GIC along with the principal. Express your answer to 2 decimal places but do not include the $ sign. Your Answer: AnswerAn accounting firm agrees to purchase a computer for $130,000 (cash on delivery) and the delivery date is in 270 days. How much do the owners need to deposit in an account paying 0.55%compounded quarterly so that they will have $130,000 in 270 days? (a) State the type. sinking fundamortization ordinary annuitypresent valuefuture value (b) Answer the question. (Round your answer to the nearest cent.)A pension fund must pay out $1 million next year, $2 million the following year, and then $3 million the year after that. If the discount rate is 8%, what is the duration of this set of payments?
- Bank A pays 2% interest compoundedannually on deposits, while Bank B pays 1.75% compounded daily.a. Based on the EAR (or EFF%), which bank should you use?b. Could your choice of banks be influenced by the fact that you might want to withdraw your funds during the year as opposed to at the end of the year? Assume that your funds must be left on deposit during an entire compounding period in order to receive any interest.Savings institutions often state a nominal rate, which can be thought of as a simple annual interest rate, and the effective interest rate, which is the actual interest rate earned due to compounding. Given the nominal rate, it is easy to calculate the effective interest rate as follows. Assume that $1 is invested in an account paying an interest rate of 6% compounded monthly. Using the compound interest formula A = P 1+ with P 0.06) 12 = 1, r = 0.06, m = 12, and n = 12, A = |1+ rate is 1.0617 -1= 0.0617, or 6.17%. Find the effective interest rate for the investments with a nominal yield of 10%, compounded quarterly. s 1.0617. So the effective interest 12 The effective annual yield is%. (Round to two decimal places as needed.)Tommy Corp. can borrow from its bank at 17 percent to take a cash discount. The terms of the cash discount are 3/19, net 45. Should the firm borrow the funds?
- Suppose you borrow from a bank $1,756.06 today (t=0). You agree to pay back $3,637.64 in 4 years (t=4). The interest rate (%) that the bank charge you is closest to ________%. Input your answer without the % sign and round your answer to two decimal places.Savings institutions often state a nominal rate, which can be thought of as a simple annual interest rate, and the effective interest rate, which is the actual interest rate earned due to compounding. Given the nominal rate, it is easy to calculate the effective interest rate as follows. Assume that $1 is invested in an account paying an interest rate of 6% compounded monthly. Using the compound interest formula A =P 1+ m with P = 1, r =0.06, m 12, and n 12 0.06 = 12, A =1 + 12 1.0617. So the effective interest rate is 1.0617 - 1 = 0.0617, or 6.17%. Find the effective interest rate for the investments with a nominal yield of 10%, compounded quarterly. The effective annual yield is %. (Round to two decimal places as needed.) Enter your answer in the answer box and then click Check Answer. Check Answer All parts showing Clear All javascript:doExercise(12); avascript:doExercise(14); Type here to searchScenario 1: Individual Retirement Accounts (IRAs) allow people to shelter some of their income from taxation. Suppose the maximum annual contribution to such accounts is $5,000 per person. Now suppose there is a decrease in the maximum contribution, from $5,000 to $3,000 per year. Shift the appropriate curve on the graph to reflect this change. This change in the tax treatment of interest income from saving causes the equilibrium interest rate in the market for loanable funds to and the level of investment spending to .