Question

ysb A loan that compounds interest monthly has an EAR of 14.40 percent. What is the APR? 919 no 2le ns notni s2.8 ineng yd ynotnevni ati allo evods to ono. B. 13.96 percent D. 13.53 percent A. 14.10 percent C. 13.59 percent 6.You just turned 21 years old and want to retire when you turn 65. You expect to live for 25 years after retirement and want to withdraw $8,000 per month in retirement, starting one month after your 65th birthday. You expect t earn a return of 0.7% on your investments every month. 1) How much retirement money do you need to have by 65th birthday to support the withdrawal? iunnA A 2) How much should you save each month if you make the first deposit one month from now and the last one on 65th birthday? Ins tnsonsq 00.51 insonsg 00.arA A. need $1,016,140.24 D. need $709,585. bsbn612 g 16-1 B. need $1,001,879.33 need S8699 won mont 69V 9n0 21200 inamyso it Sst B. $380.12 per month 299ini artzi 1sdW.vsbot 000,02,52 D. $180.89 per month 16-2 A. $400.00 per month C. $237.27 per month A new financial services company just opened in your town. To attract customers, it is offering a "9-11" loan special. The company will lend $9 today in exchange for a repayment of $11 three years from today. What is the loan rate on this deal? A. 22.2 percent 18. D. 7.4 percentoot s ai aniwollot att lo doirw C. 6.9 percent B. 10.6 percent 19. Given an interest rate of 5.0 percent per year, what is the value today of a British Consol Bond that pays perpetual stream of £250 annual payments with the first payment beginning in 10 years? slumusoA D. E5,000 B. £3,069.57 tC. E3,223.04 bo fibsn oy bsessonl tsd 000,12 to A. £238.10 20. Webster Inc. is considering the purchase of a new machine. The quote consists of a quarterly payment of $29,600 for seven years at 8 % interest. First payment occurs one quarter from now. What is the purchase price of the equipment? D. $774,311.28 sona A. $621,380.92 dosd 1ollo t n sb ymwod to s6 no 21. Suppose we know the "exchange rates": worth 85 cents now). And recall "exchange rates" are used in the following way to find the NPV of cashflows: B. $629,925.66 C. $687,418.22 moonl ten 2st on 8 nb 9629o 8a muzA 001Sr to = 0.90, =0.85 (recall this notation denotes-$1 in 2 years is x CF20 sd b NPV= CFo + x CF + o lo asd002 O Now there is a project requiring a cash outflow of $8MM in Year 2, with a cash inflow of $3MM immediately and a cash inflow of $5MM in Year 1. Suppose a buyer wishes to purchase this project but pay for it one year from now nsM 159M sdT How much should you ask for? A. 0.595 million B. 0.63 million adt lo doldW C. 0.78 million D. 0.824 million d baons 'mil A A 22. Jake owes $2,400 on his credit card. He is not charging any additional purchases because he wants to get the deb paid in full. The card has an APR of 18%. He begins first payment 1 month from today. 1) How long can the debt be paid off if he makes minimum monthly payment of $35? Relate your answer to the Timil W following 2 questions: How much of the first monthly payment of $35 pays into interest and principle respective What is the present value of a perpetual stream of $35 monthly payments? 2) What if Jake makes minimum monthly payment of $40, how long then? yllsunns am69 150 bnut art

Answer 1

14)

APR = [(1+EAR)^(1:n)-1]xn n is number of compounding per year Monthly compounding 13.53% =((1+14.4%)^(1/12)-1)*12

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