Question

An investment will pay $50 at the end of each of the next 3 years, $200 at the end of Year 4, $400 at the end of Year 5, and $600 at the end of Year 6. If other investments of equal risk earn 10 % annually, what is its present value? Its future value? Do not round intermediate calculations. Round your answers to the nearest cent. Present value: $ Future value: $ You want to buy a car, and a local bank will lend you $15,000. The loan will be fully amortized over 5 years (60 months), and the nominal interest rate will be 12 % with interest paid monthly. What will be the monthly loan payment? What will be the loan's EAR? Do not round intermediate calculations. Round your answer for the monthly loan payment to the nearest cent and for EAR to two decimal places. Monthly loan payment: $ EAR: %

Answer 1

Present Value = 50/(1.10)^3 + 200/(1.10)^4 + 400/(1.10)^5 + 600/(1.10)^6

Present Value = $761.22

Future Value = 50(1.10)^3 + 200(1.10)^2 + 400(1.10) + 600

Future Value = $1,348.55

2.

Calculating Monthly payment,

Using TVM Calculation,

PMT = [PV = 15,000, FV= 0, N = 60, I = 0.01]

PMT = $333.67

EAR = (1.01)^12

EAR = 12.68%