Question

What is the present value of a $500 perpetuity if the interest rate is 6%? If interest rates doubled to 12%, what would its present value be? Round your answers to the nearest cent. Present value at 6%: $ Present value at 12%: $ You borrow $85,000; the annual loan payments are $11,339.91 for 30 years. What interest rate are you being charged? Round your answer to the nearest whole number. You have saved $5,000 for a down payment on a new car. The largest monthly payment you can afford is $500. The loan will have an 11% APR based on end-of-month payments. What is the most expensive car you can afford if you finance it for 48 months? Do not round intermediate calculations. Round your answer to the nearest cent. What is the most expensive car you can afford if you finance it for 60 months? Do not round intermediate calculations. Round your answer to the nearest cent. a. You plan to make five deposits of $1,000 each, one every 6 months, with the first payment being made in 6 months. You will then make no more deposits. If the bank pays 8% nominal interest, compounded semiannually, how much will be in your account after 3 years? Do not round intermediate calculations. Round your answer to the nearest cent. b. One year from today you must make a payment of $6,000. To prepare for this payment, you plan to make two equal quarterly deposits (at the end of Quarters 1 and 2) in a bank that pays 8% nominal interest compounded quarterly. How large must each of the two payments be? Do not round intermediate calculations. Round your answer to the nearest cent.

Answer 1

Answer to Question 1:

Part 1 – Present Value at 6%

Present Value = Annual Payment / Discount Rate
Present Value = $500 / 0.06
Present Value = $8,333.33

Part 2 – Present Value at 12%

Present Value = Annual Payment / Discount Rate
Present Value = $500 / 0.12
Present Value = $4,166.67