Question

E. $24.20 Fou are paying an effective annual rate of 20 percent on your credit card. The interest is compounded quarterly. What is the annual percentage rate on this account (calculate the APR using the effective quarterly rate)? A. 17.50 percent B. 18.00 percent C. 18.65 percent D. 18.98 percent E. 19.50 percent 14. The present value of the following cash flow stream is $5.933.86 when discounted at 6 percent annually. What is the value of the missing cash flow? Year Cash Flow $1,500 1,750 1,250 A. $1,500 B. $1,783 C. $2,000 D. $2,217 E. $2,313 15. You need a 30-year, fixed-rate mortgage to buy a new home for $300,000. Your mortgage bank will lend you the money at a 5 percent APR for this 360-month loan, with interest compounded monthly. However, you can only afford monthly payments of $320. so you offer to pay off any remaining loan balance at the end of the loan in the form of a single balloon payment. What will be the amount of the balloon payment if you are to keep your monthly payments at $320? (Hint: find the remaining balance of the loan at then end of year 30.)

Answer 1

13]

EAR = (1 + (APR/n))ⁿ - 1,

where n is the number of compounding periods in a year. In this case, n = 4 since there are 4 quarters in a year.

20% = (1 + (APR/4))⁴ - 1

APR = ((1 + 20%)^1/4 - 1) * 4

APR = 18.65%