Homework Answers
Loan amount = $ 40000
Annual rate of interest = 3.9%
monthly interest rate = 0.325%
Frequency of compounding in a year = monthly or 12
term of loan = 10 years
no. of payment period per year = 10*12 = 120 months
Monthly Installment amount = Loan Amount/PVIFA(0.325%,120months)
=40000/99.23533
= 403.08
Total interest paid = $ 8369.87 in 10 years.
Effective rate of interest = (1+nominal rate of interest/no. of compounding in a year)^(no. of payment period per year) - 1
= (1+0.039/12)^(12) - 1
= (1+0.00325)^(12) - 1
= 1.00325^(12) - 1
= 1.0397 - 1
= 0.0397 or 3.97%
or 3.9704732701%
When compounding/discounting has to be done at intervals less than a year, a distinction should be made between (i) nominal and (ii) effective rate of interest. The coupon rate of interest is called the nominal rate of interest. The nominal rate of interest differs from the effective rate of interest due to the frequency of compounding (e.g annual, halfyearlt, quaterly, monthly) with the nominal rate. with annual compounding/conversion, the nominal rate and the effective rate would be the same. The effective rate of interest is higher and inceases with an increase in the frequency of compounding.
Please check with your answer and let me know.
Add Answer to:
You realize you cannot get an interest rate from #1 above so you decide to open...
You wish to buy a car for $12,000 at a 5% annual interest rate, compounded monthly....
You wish to buy a car for $12,000 at a 5% annual interest rate,
compounded monthly. The loan will be repaid in 5 years with monthly
payments. What is your monthly payment (calculated with the
equations on the next page)? Compare your answer to that obtained
with the built in function, PMT. Be sure to label all cells
appropriately. (There is no need to create a monthly payment table,
simply use the equations on the next page.)
Loans: where: and,...
1. A bank pays a quoted annual (simple) interest rate of 8 percent. However, it pays...
1. A bank pays a quoted annual (simple) interest rate of 8 percent. However, it pays interest (compounds) on a daily basis using a 365-day year. What is the effective annual rate of return? Show details of the EAR formula. 2. You have just taken out a 30-year mortgage on your new home for $120,000. This mortgage is to be repaid in 360 equal monthly installments. If the stated (simple) annual interest rate is 14.75 percent, what is the amount...
You take a personal loan of 1 year of $100,000 from the bank at nominal interest...
You take a personal loan of 1 year of $100,000 from the bank at nominal interest rate of 6%, interest to be paid monthly, and principal to be paid at the end of the year. what is the effective annual interest rate? a) 6% b) 6.14% c) 6.17% d) 6.25% c) 6.50% please show workings
5. You obtain a 30 years loan on the 2.4% nominal interest rate mortgage of $18,000,000 from ABC ...
Enginering Economy:
5. You obtain a 30 years loan on the 2.4% nominal interest rate mortgage of $18,000,000 from ABC bank. The payment is due each month. You are allowed to pay back only the interest due for the first three years (the grace period) then make the monthly payments thereafter. You have paid back the loan for 10 years including the three years ofthe grace period. (30%) 5.1 What is the interest due per month for the first three...
1) You wish to borrow $150,000 from a lending institution for the purchase of a house....
1) You wish to borrow $150,000 from a lending institution for the purchase of a house. The bank will lend this amount at an Annual Percentage Rate of 4.5% to be paid-off with equal monthly mortgage payments over a 30-year period. This is a 4.5% APR, 30-year fixed-rate mortgage loan. You wish to know how this loan will affect your federal income tax burden, as only the interest paid on a home mortgage, not the principal, is tax deductible. Construct...
Q1 - Describe N,I/Y,PV,PMT, and FV. Q2 – Why is there one negative sign among the...
Q1 - Describe N,I/Y,PV,PMT, and FV. Q2 – Why is there one negative sign among the last three listed in Q1? Q3 – What is the difference between compounding and discounting? Q4 – What is an annuity? What are the different types of annuities? When are payments made? Q5 – What is a perpetuity? What is the relationship between PV and Interest? Q6 – Does FV get larger or smaller based off monthly compounding compared to quarterly compounding? Q7 –...
Assume that you have a 30 year fully-amortized fixed rate mortgage for your home. Your loan...
Assume that you have a 30 year fully-amortized fixed rate mortgage for your home. Your loan amount is $300,000 with a 3% annual interest rate. After 28 years, you would like to sell the property. What is your loan balance at the end of 28 years? Assume that you have a 30 year fully-amortized fixed rate mortgage for your home. Your loan amount is $300,000 with a 3% annual interest rate and your balloon payment is $50,000. What is your...
Show your work as much as possible below each question to get full credit (Le, you...
Show your work as much as possible below each question to get full credit (Le, you should provide information about PV: FV. PMT, I/Y, N ... before writing down your answer) 1. What is the present value of the following cash flow stream at a rate of 8.0%? Years: CFs: $2,450 $3,175 $4,400 2. You would like to travel in South America 5 years from now, and you can save $3,100 per year, beginning one year from today. You plan...
1. You have $49,061.69 in a brokerage account, and you plan to deposit an additional $5,000...
1. You have $49,061.69 in a brokerage account, and you plan to deposit an additional $5,000 at the end of every future year until your account totals $200,000. You expect to earn 9.1% annually on the account. How many years will it take to reach your goal? Round your answer to the nearest whole number. 2. Present and Future Value of an Uneven Cash Flow Stream An investment will pay $100 at the end of each of the next 3...
Fleda's Beauty Company has $200,000 of total assets and earns 20 percent interest and taxes on...
Fleda's Beauty Company has $200,000 of total assets and earns 20 percent interest and taxes on these assets. The ratio of total debts to total assets (or DR been set at 50 percent. The interest rate on short-term debt is 7 percent, while the interest rate on long-term debt is 10 percent. A conservative policy calls for only long-term debt with no short-term debt; an intermediate policy calls for 50 percent short-term debt and 50 percent long-term debt; and an...
You wish to buy a car for $12,000 at a 5% annual interest rate,
compounded monthly. The loan will be repaid in 5 years with monthly
payments. What is your monthly payment (calculated with the
equations on the next page)? Compare your answer to that obtained
with the built in function, PMT. Be sure to label all cells
appropriately. (There is no need to create a monthly payment table,
simply use the equations on the next page.)
Loans: where: and,...
Enginering Economy:
5. You obtain a 30 years loan on the 2.4% nominal interest rate mortgage of $18,000,000 from ABC bank. The payment is due each month. You are allowed to pay back only the interest due for the first three years (the grace period) then make the monthly payments thereafter. You have paid back the loan for 10 years including the three years ofthe grace period. (30%) 5.1 What is the interest due per month for the first three...
1) You wish to borrow $150,000 from a lending institution for the purchase of a house. The bank will lend this amount at an Annual Percentage Rate of 4.5% to be paid-off with equal monthly mortgage payments over a 30-year period. This is a 4.5% APR, 30-year fixed-rate mortgage loan. You wish to know how this loan will affect your federal income tax burden, as only the interest paid on a home mortgage, not the principal, is tax deductible. Construct...
Show your work as much as possible below each question to get full credit (Le, you should provide information about PV: FV. PMT, I/Y, N ... before writing down your answer) 1. What is the present value of the following cash flow stream at a rate of 8.0%? Years: CFs: $2,450 $3,175 $4,400 2. You would like to travel in South America 5 years from now, and you can save $3,100 per year, beginning one year from today. You plan...
Fleda's Beauty Company has $200,000 of total assets and earns 20 percent interest and taxes on these assets. The ratio of total debts to total assets (or DR been set at 50 percent. The interest rate on short-term debt is 7 percent, while the interest rate on long-term debt is 10 percent. A conservative policy calls for only long-term debt with no short-term debt; an intermediate policy calls for 50 percent short-term debt and 50 percent long-term debt; and an...
Most questions answered within 3 hours.
-
Use generating function to find the number of distributions of
20 people into four different rooms...
asked 10 minutes ago -
The following data set consists the number of minutes a sample
of 25 people run every...
asked 13 minutes ago -
Suppose vacuum cleaners are part of the market basket used to
compute the CPI. Suppose also...
asked 25 minutes ago -
What intermediate results after the addition of H3O+ to
E-3-methyl-2-pentane?
pentene*
asked 30 minutes ago -
Potassium hydrogen phthalate is a solid, monoprotic acid
frequently used in the laboratory to standardize strong...
asked 49 minutes ago -
1-Describe the 3 major classes of ownerships of retailers
2-What are the differences between consumer and...
asked 33 minutes ago -
A Student takes a sample from a table top in the student lounge
using a sterile...
asked 40 minutes ago -
Give an answer that's easy to understand. Define stack data
structure. Show how the Stack operations...
asked 49 minutes ago -
The following financial information is for Annapolis Corporation
are for the fiscal years ending 2019 &...
asked 39 minutes ago -
Which prezygotic barrier to reproduction results in hybrid
sterility?
Question 11 options:
A)
Habitat isolation
B)...
asked 49 minutes ago -
You own a portfolio that has $2709 invested in Stock A and $4387
invested in Stock...
asked 1 hour ago -
A parameter estimate is said to be statistically significant if
there is sufficient evidence that the...
asked 1 hour ago