Adam is loaning $5000 to Bert for a period of 2 years. Suppose Bert will repay...
Adam is loaning $5000 to Bert for a period of 2 years. Suppose Bert will repay the loan with 4 equal payments.
a. If interest is 6% effective interest, how much will Bert’s payments be to Adam every 6 months?
b. If Adam reinvests the payments into an account earning 3% annual interest compounded monthly, how much will he have in his saving account at the time that Bert pays his 4th payment?
c. What is Adam’s rate of return on his initial investment of $5000? Quote the rate as an effective rate.
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