Question 1. Gomez Electrics needs to arrange financing for its expansion program. Bank A offers to lend Gomez the required funds on a loan in which interest must be paid monthly, and the quoted rate is 8%. Bank B will charge 9%, with interest due at the end of the year. What is the difference in the effective annual rates charged by the two banks?
Question 2. Today, Bruce and Brenda each have $150,000 in an investment account. No other contributions will be made to their investment accounts. Both have the same goal: They each want their account to reach $1 million, at which time each will retire. Bruce has his money invested in risk-free securities with an expected annual return of 5%. Brenda has her money invested in a stock fund with an expected annual return of 10%. How many years after Brenda retires will Bruce retire?
Question 3. You are currently investing your money in a bank account that has a nominal annual return of 7%, compounded monthly. How many years will it take for you to double your money?