Name: Baron, Denise Ann E. Subject: Banking Ins. Course & BSBA Year: 3rd Year
Work #4
Discussion Questions:
1. Given a choice of two investments, would you choose one that pays a total return of 30
percent over five years or one that pays 0.5 percent per month for five years?
– It states here that if I willing to go what I should choose, the initial short return or the initial big
return and of course I choose is the initial big return of course we are surely choose the big one
return. But even though we choose the one that in short term it still the same that the only
problem is we will wait for it until the money comes on date.
2. A financial institution offers you a one-year certificate of deposit with an interest rate of 5
percent. You expect the inflation rate to be 3 percent. What is the real return on your deposit?
Explain
– The real return in my deposit is 4 percent. Take the nominal interest rate and subtract inflation
rate to get the real return in my deposit.
3. Consider two scenarios. In the first, the nominal interest rate is 6 percent, and the expected
rate of inflation is 4 percent. In the second, the nominal interest rate is 5 percent, and the
