Question

3.

You want to buy a car, and a local bank will lend you $20,000. The loan would be fully amortized over 3 years (36 months), and the nominal interest rate would be 12%, with interest paid monthly. What is the monthly loan payment? Round your answer to the nearest cent.
$   

What is the loan's EFF%? Round your answer to two decimal places.
  %

4.

1. Find the present values of the following cash flow streams. The appropriate interest rate is 5%. Round your answers to the nearest cent. (Hint: It is fairly easy to work this problem dealing with the individual cash flows. However, if you have a financial calculator, read the section of the manual that describes how to enter cash flows such as the ones in this problem. This will take a little time, but the investment will pay huge dividends throughout the course. Note that, when working with the calculator's cash flow register, you must enter CF₀ = 0. Note also that it is quite easy to work the problem with Excel, using procedures described in the Chapter 4 Tool Kit.)

   Year	Cash Stream A	Cash Stream B
   1	$100	$300
   2	400	400
   3	400	400
   4	400	400
   5	300	100

   
   Stream A $   
   Stream B $   
2. What is the value of each cash flow stream at a 0% interest rate? Round your answers to the nearest cent.
   Stream A $   
   Stream B $  

5.

Find the future values of the following ordinary annuities:

1. FV of $200 paid each 6 months for 4 years at a nominal rate of 12%, compounded semiannually. Round your answer to the nearest cent.
   $   
2. FV of $100 paid each 3 months for 4 years at a nominal rate of 12%, compounded quarterly. Round your answer to the nearest cent.
   $   
3. The annuities described in parts a and b have the same amount of money paid into them during the 4-year period and both earn interest at the same nominal rate, yet the annuity in part b earns more than the one in part a over the 4 years. Why does this occur?
   -Select-The nominal deposits into the annuity in part (b) are greater than the nominal deposits into the annuity in part (a). The annuity in part (a) is compounded less frequently; therefore, more interest is earned on interest. The annuity in part (a) is compounded more frequently; therefore, more interest is earned on interest. The annuity in part (b) is compounded less frequently; therefore, more interest is earned on interest. The annuity in part (b) is compounded more frequently; therefore, more interest is earned on interest.

6.

To complete your last year in business school and then go through law school, you will need $25,000 per year for 4 years, starting next year (that is, you will need to withdraw the first $25,000 one year from today). Your uncle offers to put you through school, and he will deposit in a bank paying 9.57% interest a sum of money that is sufficient to provide the 4 payments of $25,000 each. His deposit will be made today.

1. How large must the deposit be? Round your answer to the nearest cent.
   $   
2. How much will be in the account immediately after you make the first withdrawal? Round your answer to the nearest cent.
   $   
   
   How much will be in the account immediately after you make the last withdrawal? Round your answer to the nearest cent. Enter "0" if required
   $  

7.

You need to accumulate $10,000. To do so, you plan to make deposits of $1,450 per year - with the first payment being made a year from today - into a bank account that pays 10.24% annual interest. Your last deposit will be less than $1,450 if less is needed to round out to $10,000. How many years will it take you to reach your $10,000 goal? Round your answer up to the nearest whole number.
year(s)

How large will the last deposit be? Round your answer to the nearest cent.
$  

8.

1. It is now January 1. You plan to make a total of 5 deposits of $300 each, one every 6 months, with the first payment being made today. The bank pays a nominal interest rate of 10% but uses semiannualcompounding. You plan to leave the money in the bank for 10 years. How much will be in your account after 10 years? Round your answer to the nearest cent.
   $   
2. You must make a payment of $1,788.84 in 10 years. To get the money for this payment, you will make 5 equal deposits, beginning today and for the following 4 quarters, in a bank that pays a nominal interest rate of 8% with quarterly compounding. How large must each of the 5 payments be? Round your answer to the nearest cent.
   $  

Answer 1