(a) Find the nominal rate of interest j compounded quarterly which is equivalent to a 5% e ective rate of interest.
(b) Which one will deliver a higher future value on a deposit of $1000 after one year: an interest rate of 15% compounded daily or a rate of interest of 15:8% compounded semi-annually?
(c) Suppose that you borrow $5000 today with interest at 5% compounded semi-annually. If you agree to pay $1000 one year from today, $2000 two years from today, and a nal remaining balance 3 years from today, nd the nal amount that you will have to pay at the end of the 3rd year.
(d) You receive a $15; 000 signing bonus from your new employer and decide to invest it for two years. Your banker suggests two alternatives, both requiring a commitment for the full two years. The rst alternative will earn 8% per year for both years. The second alternative earns 6% for the rst year, and 10% for the second year. Which one should you choose in order to be more pro table assuming interest are compounded annually?
(e) Explain the terms
(i) whole life insurance,
(ii) n-year term insurance,
(iii) n-year endowment insurance.