Question

Annual Calculations 6-13) Compute the EUAC for these cash flows at an annual interest rate of 8%. Cash Flow Year -$10,000 -$10,000 Bonds 7-32) Mike buys a corporate bond with a face value of $1,000 for $800. The bond matures in 10 years and pays a coupon interest rate of 5%. Interest is paid every quarter. a. Determine the effective rate of return if Mike holds the bond to maturity? b. What effective interest rate will Mike get if he keeps the bond for only 5 years and sells it for $9002 Discounts and Fees 7-39) A local used car dealer calculates its "4%" financing as follows. If $3,600 is borrowed to be repaid over a 3-year period, the interest charge is ($3,600)(0.04)(3 years) - $432. The S432 of interest is deducted from the $3,600 loan and the customer has $3,168 toward the cost of a car. The customer must repay the loan with 1/36 of $3,600, or $100, monthly payments for 36 months. What is the effective annual interest rate that is being charged here? Incremental Analysis 7-69) A state's department of transportation is deciding whether to buy or lease a sonar tracking system for asphalt, concrete, and gravel trucks to be used in road paving. Purchasing the sonar system will cost $5,000 per truck, with a salvage value of $1,500 after the system's useful life of five years.

Answer 1

Solution to 6-13)

solution to 6-13) i=81: 6-13) cash flow:- Iw :- 0-1-2-3-4-5. $-10,000 $ -10,000 Present worth PW = 10,0001 PF 18%,1) +10,000 (P/F, 87.5) = 10,000 itones) + 10,000 u tomocje) (1+ = 10,000 (019259) +10,000 (0.68058 PW = 16064,832 EAUC = Pwx (AlP184.5) Gyaw = 16064-832 CAP: 804,5) = 160644 832 x 10:08 % (0.08+1) 1 (1+0.08 ) 5 - EUAC = 16064.832x02505 EUAC =$4023.54