Assume you needed $10 000 on April 1, 2006, and two options were available: (a) Your banker would…

Assume you needed $10 000 on April 1, 2006, and two options were available:

(a) Your banker would lend you the money at an annual interest rate of 7.0%, compounded monthly, to be repaid on September 1, 2006.

(b) You could cash in a certificate of deposit (CD) that was purchased earlier. The cost of the CD purchased September 1, 2005, was $10 000. lf left in the savings and loan company until September 1, 2006, the CD's annual interest is 3.8% compounded monthly. If the CD is cashed in before September 1, 2006, you lose all interest for the first three months and the interest rate is reduced to 1.9%, compounded monthly, after the first three months. Which option is better and by how much? (Assume an annual rate of 3.6%, compounded monthly, for any funds for which an interest rate is not specified.)

 

Need your ASSIGNMENT done? Use our paper writing service to score better and meet your deadline.


Click Here to Make an Order Click Here to Hire a Writer