Answer to Question #233745 in Civil and Environmental Engineering for Alan Enrico V Tuib

Question #233745
Mr. Sansome withdrew $1000 from a savings account and invested it in common stock. At the end of 5 years, he sold the stock and received a check for $1307. If Mr. Sansome had left his $1000 in the savings account, he would have received an interest rate of 5%, compounded quarterly. Mr. Sansome would like to compute a comparable interest rate on his common stock investment. Based on quarterly compounding, what nominal annual interest rate did Mr. Sansome receive on his investment in stock?
Expert's answer

• Investment was made a year ago and return was obtained a year from now so it means 2 successive years

.i.e. T=2 years

• Assuming it to be compounded annually from 90$To 110$

,where n=no of times it is compounded annually, t= no of years

, because

• Assuming it to be simple interest

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