110k views
3 votes
Suppose Bank One offers a certificate of deposit that pays $5,000 in four years for exchange for $4,000 today. What interest rate is Bank One offering?"

1 Answer

6 votes

Answer:

Bank One is offering a simple interest rate of 6.25% per annum.

Explanation:

Given that Bank One offers a certificate of deposit that pays $ 5,000 in four years for exchange for $ 4,000 today, to determine what interest rate is Bank One offering the following calculation must be performed:

(5000 - 4000) / 4 = X

1000/4 = X

250 = X

4000 = 100

250 = X

250 x 100/4000 = X

25000/4000 = X

6.25 = X

Therefore, Bank One is offering a simple interest rate of 6.25% per annum.

User Udit Agarwal
by
8.5k points

No related questions found

Welcome to QAmmunity.org, where you can ask questions and receive answers from other members of our community.

9.4m questions

12.2m answers

Categories