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An investor invests $5000 today for 7 years at an interest rate of 8% compounded quarterly. Which of the following is true?
Correct Answer: A
Using Texas Instruments BA II PLUS To work out the future value 2 nd QUIT: 0.00 2 nd CLR TVM: 0.00 2 nd P/Y: P/Y = previous value 4 ENTER: P/Y = 4.00 2 nd QUIT: 0.00 5000 +- PV: PV = - 5,000.00 28 N: N = 28.00 8 I/Y: I/Y = 8.00 CPT FV: FV = 8,705.12 And to find the effective annual interest rate 2 nd QUIT: NOM = previous value 2 nd CLR TVM: NOM = 0.00 8 ENTER: NOM = 6.00 DownArrow: EFF = 0.00 DownArrow: C/Y = previous value 4 ENTER: C/Y =4.00 UpArrow: EFF = 0.00 CPT: EFF = 8.24 Using HP 12C To find Future value, f CLEAR FIN: 0.00000000 f CLEAR REG: 0.00000000 28 n: 28.00000000 2 i: 2 .00000000 5000 CHS PV: -5,000..000000 g END: - 3,000..000000 FV:8 705 12 FV:8,705.12 To find Effective Rate: f CLEAR FIN: 0.00000000 f CLEAR REG: 0.00000000 8 ENTER: 8.00000000 4 n x i: 2.00000000 100 CHS ENTER PV: -100.00000000 FV: -108.2432160 i: 8.24321600.