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Savatey [412]
3 years ago
11

1. What is the amount of interest earned after two years on a $100 deposit paying 4 percent simple interest annually? $8.00 $4.0

8 $8.16 $4.00 2. What is the amount of compound interest earned after three years on a $100 deposit paying 8 percent interest annually? $24.00 $8.00 $16.64 $25.97 3. A business just took out a loan for $100,000 at 10% interest. If the business pays the loan off in three months, how much did the business pay in interest? $2,500.00 $10.00 $250.00 $10,000.00 4. What is the annual percentage yield (APY) for a deposit paying 5 percent interest with monthly compounding? 5.00% 5.12% 79.59% 0.42%
Business
1 answer:
Leona [35]3 years ago
7 0

Answer:

  1. $8.00
  2. $25.97
  3. $2500

Explanation:

1. The amount earned each year is 4% × $100 = $4. After 2 years, the account has earned 2×$4.00 = $8.00.

__

2. If the account earned simple interest, it would earn 8% × $100 = $8.00 each year. After 3 years, the interest would total $24.00. Since the interest is compounded, the interest also earns interest and the total amount of interest is more than $24.00. The appropriate answer choice is $25.97.

__

3. If the business had taken a year to pay off the loan, it would have paid in interest ...

  10% × $100,000 = $10,000

Since the loan was paid off in 1/4 year, the amount of interest paid is 1/4 that amount, so is

  (1/4) × $10,000 = $2,500

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Answer:

Risk and Return

1. Joe is an average investor. His financial advisor gave him options of investing in stock A, with a σ of 12%, and stock B, with a σ of 9%. Both stocks have the same expected return of 16%. Joe can pick only one stock and decides to invest in stock B.

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Explanation:

1. Joe's decision to invest in stock B is a good financial decision.  Since both investments have the same returns, the decision on which investment to take shifts to the standard deviation of the returns, which specifies the variability of the returns.  Invariably, the investment with less standard deviation should win the vote.  Therefore, Joe's decision is a good financial decision because investment in B has a standard deviation of 9% unlike A's 12%.

2. Putting all eggs in one market as Marcie had done by allocating all her investments in the ESOP is not a good financial decision, theoretically.  It is always best to spread the risks, though higher-yielding investments (returns) bear higher risks.

3. The decision of Erin to conduct due diligence on the hedge fund's assets, despite its past performance is a good financial decision.  Due diligence reveals some behind-the-scene information that are instrumental in making sound business decisions.  Who are the present managers of the fund?  What systems are in place in the entity to guarantee similar future performance, all things being equal?  What market's sentiments and information are available for consideration?  These questions, and many others can be answered through a due diligence.  Surely, "past performance is no guarantee of future results."

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