Use the Information for the Question(s)below

question 3

Multiple Choice

Use the information for the question(s) below.
Your firm needs to invest in a new delivery truck.The life expectancy of the delivery truck is five years.You can purchase a new delivery truck for an upfront cost of $200,000,or you can lease a truck from the manufacturer for five years for a monthly lease payment of $4000 (paid at the end of each month) .Your firm can borrow at 6% APR with quarterly compounding.
-The effective annual rate for a certificate of deposit that pays 3.9% APR compounded monthly is closest to:

• A)3.83%.
• B)3.90%.
• C)3.97%.
• D)4.04%.

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Definitions:

Federal Reserve

The central banking system of the United States, responsible for monetary policy and regulation of financial institutions.

State Banking Agencies

Governmental bodies at the state level that regulate and oversee banking institutions and their operations within that state.

Federal Comptroller

A government official responsible for supervising the quality and legality of financial and administrative operations in federal agencies.

Underwriting

The process by which insurers or lenders assess the risk of a potential client, deciding whether to accept the risk and on what terms, thereby determining the premium or interest rate.