Would you rather invest in an account that pays 7% with annual compounding or7% with monthly compounding? Would you rather borrow at 7% and make annualor monthly payments? Why?

Which of the following is considered an annuity? OA share of common stock. A conventional fixed payment mortgage. A construction loan with varying costs and payments. A cash payment for a new car. O A savings account with occasional deposits for a newborn child.

Please answer this question: What is the value at the end of Year 3 of the following cash flow stream if interest is 4% compounded semiannually? (Hint: you can use the EAR and treat the cash flows as an ordinary annuity or use the periodic rate and compound the cash flows individually.) What is the PV? What would be wrong with your answer to parts I(1) and I(2) if you used the nominal rate, 4%, rather than the EAR or the periodic rate, I sow /2=4%/2=2%, to solve the problems?

Suppose the interest rate is 3.9%. a. Having $350 today is equivalent to having what amount in one year? b. Having $350 in one year is equivalent to having what amount today? c. Which would you prefer, $350 today or $350 in one year? Does your answer depend on when you need the money? Why or why not? a. Having $350 today is equivalent to having what amount in one year? It is equivalent to $. (Round to the nearest cent.)

Assess the following statements: 1. Simple interest calculations assume the interest earned is never reinvested. II. The real interest rate is the increment to purchasing power that the lender earns in order to induce him or her to forego current consumption. II. Earning a 5% interest rate with annual compounding is better than earning a 4.95% interest rate with semiannual compounding. IV. For any positive interest rate the present value of a given annuity will be less than the sum of the cash flows and the future value of the same annuity will be greater than the sum of the cash flows. All statements are correct. Two statements are incorrect. O Three statements are incorrect. Only one statement is incorrect.