Answer: 12.47%
Explanation:
First convert the APR to the relevant periodic rate.
The compounding is done daily so the periodic rate is:
= 11.75%/365
Effective Annual rate is calculated by the formula:
= ( 1 + periodic rate) ^ compounding period per year - 1
= ( 1 + 11.75%/365)³⁶⁵ - 1
= 12.47%
I think the answer is false
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Answer:
C) $142,576
Explanation:
The computation of the maturity value of the CD is shown below:
We use the future value formula that is shown in the spreadsheet.
Given that,
Present value = $100,000
Rate of interest = 12% ÷ 4 quarters = 3%
NPER = 3 years × 4 quarters = 12 years
PMT = $0
The formula is shown below:
= -FV(Rate;NPER;PMT;FV;type)
The future value is $142,576
Answer: Setting interest rates and acting as a lender to banks
Explanation: The Fed or the Federal reserve is a central banking authority in any nation. It is responsible for maintaining the money supply in the economy. Some of the functions performed by the central bank are,
a. Setting interest rates and acting as a lender to banks
b. Print currency notes and coins
c. Setting the repo and the reverse repo rates
d. Clearing inter bank payments.
Therefore, the correct option is Setting interest rates and acting as a lender to banks.
Answer:
First we need to compute levered cost of equity
Ro = 15.40%
D/E ratio = 0.40/(1-0.40) = 0.6667
Rd=7.2%
We have following formula for levered cost of equity using MM model proposition II:
Without taxes
Re = Ro + (Ro – Rd) x (1-t) x D/E
= 0.1380 + (0.1380-0.0720)x (1-0.0)x0.6667
= 0.1380 + 0.0440
= 18.20%
Therefore, new cost of equity would be 18.20%.
With taxes
Re = Ro + (Ro – Rd) x (1-t) x D/E
= 0.1380 + (0.1380-0.0720)x (1-0.34)x0.6667
= 0.1380 + 0.0290
= 16.70%
Therefore, new cost of equity would be 16.70%.
