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:

Unions

Organizations formed by workers from related fields that work together to protect their collective interests, such as better wages, working conditions, and benefits.

Secondary Strikes

Secondary strikes involve workers going on strike in solidarity with workers from a different company or industry, aiming to support another group's strike or labour dispute.

Globalization

The process of increased interconnectedness among countries, primarily in economics, politics, and culture, due to advances in communication and transportation.

International Trade

The exchange of goods, services, and capital between countries, driven by a desire for economic benefit and efficiency.