1. (a) A bank account pays 5.5% annual interest, compounded monthly. How long will it take the money to double in this account?

(b) An investment offers to double your money in 5 years, what the APR are you being offered?

2. A bank offers a savings account with a 6% annual interest rate, compounded monthly. Stu wants to open a savings account and make one deposit now that will enable him to withdraw $700 to go on vacation 5 months from now and $2000 for a deposit on a rental apartment when he starts working in 3 years from now. How much money does Stu need to deposit now?

3. Mr. Smith has arranged for a mortgage loan of $200,000. The annual rate on the loan is 12%. The bank requires Mr. Smith to make payments of $4,212.90 at the end of every month. How many payments will Mr. Smith have to make?

4. You have decided to buy a car, the price of the car is $18,000. The car dealer presents you with two choices: (A) Purchase the car for cash and receive $2000 instant cash rebate your out of pocket expense is $16,000 today.

(B) Purchase the car for $18,000 with zero percent interest 36-month loan with monthly payments. Market interest rate is 4%. Which option above is cheaper? How much do you save

Future and Present Value 1. =(1+)

2. = (1+)

3. =(1+) 1

4. =()1

5. =()

(1+)

Annuity

1. =[1 1 ]

2. = [1 1 ]

   (1+)

3. = [()()]

   (1+)

4. =[(1+)1]

Annuity Due 5. =[1 1 ](1+)

6. =[(1+) 1](1+)

EAR & APR

1. = (1+) 1

2. =[(1+) 1]

(1+)

(1+)

1