One Payment Stream Is Being Compared to Another

question 176

Multiple Choice

One payment stream is being compared to another. The first option is for $500 semi-annual payments over 5 years at an interest rate of 6% compounded semi-annually. The second option is for $250 quarterly payments over 5 years, with interest compounded quarterly. Determine the nominal rate of interest to be offered on the second option for both options to have equal future values.

• A) 4.95%
• B) 5.25%
• C) 5.65%
• D) 6.05%
• E) 6.85%

---

Definitions:

Selling Price

The price at which an item or product is sold to the buyer.

Standard Error of Estimate

An indicator of how accurate predictions are using a regression line, shown by the average gap between the observed values and the regression line.

Grateful Dead Concert

A live performance by the American rock band Grateful Dead, known for their unique and eclectic style, as well as their devoted fan base known as "Deadheads."

Concert Goers

Individuals who attend live music performances or concerts.