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    Assignment For BKM

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    Shankey Gupta
    The document is about interest rates on certificates of deposit (CDs) from ABC Bank. It includes a table showing interest rates and annual percentage yields for CD terms ranging from 3 months to 5 years. It also includes exercises asking the reader to calculate yields, future values of investments, and monthly loan payments based on the interest rate information provided.

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    Assignment For BKM

    Uploaded by

    Shankey Gupta
    25 views3 pages
    The document is about interest rates on certificates of deposit (CDs) from ABC Bank. It includes a table showing interest rates and annual percentage yields for CD terms ranging from 3 months to 5 years. It also includes exercises asking the reader to calculate yields, future values of investments, and monthly loan payments based on the interest rate information provided.

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    The document is about interest rates on certificates of deposit (CDs) from ABC Bank. It includes a table showing interest rates and annual percentage yields for CD terms ranging from 3 months to 5 years. It also includes exercises asking the reader to calculate yields, future values of investments, and monthly loan payments based on the interest rate information provided.

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    25 views3 pages

    Assignment For BKM

    Uploaded by

    Shankey Gupta
    The document is about interest rates on certificates of deposit (CDs) from ABC Bank. It includes a table showing interest rates and annual percentage yields for CD terms ranging from 3 months to 5 years. It also includes exercises asking the reader to calculate yields, future values of investments, and monthly loan payments based on the interest rate information provided.

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    of 3

    FNCE 100 Fall 2012 Interest Rate Exercises

    MacKinlay

    CD Rate Chart
    Interest is compounded daily. Minimum Deposit: If you have no other ABC accounts, a minimum of $10,000 is required to open a Certificate of Deposit. Persons who have ABC accounts may open a Certificate of Deposit with a minimum of $2,500. Annual Percentage Yields (APYs) assume interest and principal remain on deposit until maturity. Substantial penalty for early withdrawal.

    Term 91 days 6 months 12 months 18 months 24 months 30 months 36 months 42 months 48 months 60 months

    Interest Rate .10% .10% .85% .95% 1.09% 1.24% 1.34% 1.44% 1.59% 1.83%

    Annual Percentage Yield .10% .10% .85% .95% 1.10% 1.25% 1.35% 1.45% 1.60% 1.85%

    Source: www.advantabankcorp.com (September 23, 2009)

    Term Structure of Interest Rates (CDs)

    Yield (%)

    Time (years)

    Exercises: 1. Given the listed interest rates (compounded daily) verify the corresponding annual yield for a term of 24 months. 2. Suppose that you invest $25,000 for a 3-year term and receive all interest at maturity. After three years, how much will your initial investment be worth? 3. You have $15,000 available to invest. You do not expect to need access to these funds for 5 years. You decide to invest for two years now and, after the two years, you intend to then invest for three more years. What must the 3-year rate (stated as an annual yield) be in two years time for your investment to have more value after five years than just committing to a five year term now? 4. A home equity loan rate is advertised to be 6% APR. This advertised rate is an annual rate compounded monthly. What is the annual yield for this rate? Suppose you borrow $100,000 at this rate for a term of 10 years. What will your monthly payments be?

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