Problem

A bank offers its customers a Christmas Club account, in which they deposit $12.61 a week for 39 weeks, starting in mid-February. At the end of 39 weeks (mid-November), each customer will have accumulated $500, which can be withdrawn to pay for gifts and other seasonal expenses. What is the nominal interest rate, assuming continuous compounding?

A. 4.25% C. 5.24%

B. 4.52% D. 5.42%

Watch the Video (GERTC +)

Problem

An engineering firm has turned to Friendly Shark, Inc., to borrow $30 000 needed for a short-term (2-year) project, attracted by an advertisement announcing an interest rate of 12% per year. Friendly Shark's loan statement indicates the following:

Interest: ($30 000)(1% per month)(24 months) = $ 7 200

Loan: $30 000

Total: $37 200

Monthly installment = $ 37 200/24 = $1 550

What is the actual cost of borrowing money from Friendly Shark, Inc.?

A. 23.87% C. 22.67%

B. 21.57 % D. 24.83%

Watch the Video (GERTC +)