HomeworkLib
Question

You have $3500 to invest in a Certificate of Deposit. The local bank offers 3.0% (per...

You have $3500 to invest in a Certificate of Deposit. The local bank offers 3.0% (per year) for a 12 month FDIC insured CD. A non-financial institution offers 8% (per year) on a 12 month investment. What is the risk premium in percentage? Show work.

business   finance   
0 0
Add a comment Improve this question Transcribed image text
Next > < Previous
Sort answers by oldest

Homework Answers

Answer #1

risk premium = return on risky asset - return on risk free asset = 8% - 3% = 5%

ANSWER : RISK PREMIUM = 5%(Thumbs up please)

0 0
Add a comment
Know the answer?
Add Answer to:
You have $3500 to invest in a Certificate of Deposit. The local bank offers 3.0% (per...
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for? Ask your own homework help question. Our experts will answer your question WITHIN MINUTES for Free.
Similar Homework Help Questions

  • Answer Point Value Points Earned 5. Selecting an investment. Avery has $5,000 to invest for the future. The local...

    Answer Point Value Points Earned 5. Selecting an investment. Avery has $5,000 to invest for the future. The local bank offers Avery 3% on a 12-month FDIC-insured CD. Lemonade Inc., a new startup, offers 10.5% on a 12-month investment opportunity. What is the risk premium between the two offers? Work: Total Points Possible Score Earned

  • Future value (with changing years). Dixie Bank offers a certificate of deposit with an option to...

    Future value (with changing years). Dixie Bank offers a certificate of deposit with an option to select your own investment period. Jonathan has $7,500 for his CD investment. If the bank is offering a 4.5% interest rate, compounded annually, how much will the CD be worth at maturity if Jonathan picks a a. two-year investment period? b. six-year investment period? c. ten-year investment period? d. fifteen-year investment period? a. How much will the $7,500 CD investment at 4.5% interest rate...

  •  Dixie Bank offers a certificate of deposit with an option to select your own investment period....

     Dixie Bank offers a certificate of deposit with an option to select your own investment period. Jonathan has $7,000 for his CD investment. If the bank is offering a 6​% interest​ rate, compounded​ annually, how much will the CD be worth at maturity if Jonathan picks a two year investment​ period? a five​-year investment​ period? a eight​-year investment​ period? a fifteen year year investment​ period? a. How much will the $7,000 CD investment at 6​% interest rate be worth at...

  • Self-Study Problem 5.01 John Johnson is planning to invest $29,000 in a bank certificate of deposit...

    Self-Study Problem 5.01 John Johnson is planning to invest $29,000 in a bank certificate of deposit (CD) for five years. The CD will pay interest of 8 percent. What is the future value of John's investment? (Round answer to 2 decimal places, e.g. 52.75.) Future value $

  • 1. Allen Paige is planning to invest $10,000 in a bank certificate of deposit (CD) for...

    1. Allen Paige is planning to invest $10,000 in a bank certificate of deposit (CD) for five years. The CD will pay interest of 9 percent compounded annually. What is the future value of Allen’s investment? How much would that investment be if Allen received simple interest only instead of compounded interest? 2. Mary Grace expects to need $50,000 for a down payment on a house in six years. How much would she have to invest today in an account...

  • You plan to invest an amount of money in five-year certificate of deposit (CD) at your...

    You plan to invest an amount of money in five-year certificate of deposit (CD) at your bank. The stated interest rate applied to the CD is 12 percent, compounded monthly. How much must you invest if you want the balance in the CD account to be $8,500 in five years? Please explain the formula.

  • Suppose you have several choices for placing your savings in insured bank certificates of deposit. They...

    Suppose you have several choices for placing your savings in insured bank certificates of deposit. They all pay 5 percent per year – the going interest rate for bank deposits. Most observers expect interest rates to remain at 5 percent for some time to come. One is for 1 year, the second is for 5 years, and the third is for 10 years. Which of the following is the best financial investment? A The one-year certificate. B The five-year certificate....

  • A local bank’s website offers an 18 month certificate of deposit for 1.95% interest compounded monthly,...

    A local bank’s website offers an 18 month certificate of deposit for 1.95% interest compounded monthly, 1.99% APY. Is this bank violating the Truth in Lending Act? What is the effective interest rate for a nominal interest rate of 9.49%, compounded daily?

  • Round to the nearest cent Future value (with changing years). Dixie Bank offers a certificate of...

    Round to the nearest cent Future value (with changing years). Dixie Bank offers a certificate of deposit with an option to select your own investment period. Jonathan has $5,000 for his CD investment. If the bank is offering a 6% interest rate, compounded annually, how much will the CD be worth at maturity if Jonathan picks a a. three-year investment period? b. five-year investment period? c. ten-year investment period? d. twenty-year investment period?

  • Calculating Future Values. You have $7,000 to deposit. Regency Bank offers 12 percent per year compounded...

    Calculating Future Values. You have $7,000 to deposit. Regency Bank offers 12 percent per year compounded monthly (1 percent per month), while King Bank offers 12 percent but will only compound annually. How much will your investment be worth in 20 years at each bank?

ADVERTISEMENT
Free Homework Help App
Download From Google Play
Scan Your Homework
to Get Instant Free Answers
Need Online Homework Help?
Ask a Question
Get Answers For Free
Most questions answered within 3 hours.
ADVERTISEMENT
ADVERTISEMENT