Question
1) Calculate the effective annual rate for each. 6percent compounded annually. ___% 6percent compounded semiannually. ____% 6percent compounded quarterly.____% 6percent compounded monthly._____% 2) Your credit
1)
Calculate the effective annual rate for each.
6percent compounded annually. ___%
6percent compounded semiannually. ____%
6percent compounded quarterly.____%
6percent compounded monthly._____%
2)
Your credit card company charges you 1.65 percent interest per month.
What is the annual percentage rate on your account?
APR =_____%
What is the effective annual rate on your account?
EAR =_____%
3)
You are paying an effective annual rate of 18.98 percent on your credit card. The interest is compounded monthly. What is the annual percentage rate on this account?
APR =____percent
4)
You are considering a short-term loan that charges 1% interest per day.
What is the APR?___%
What is the EAR?___%
Now you're considering a payday loan. The finance charge is $15 for every $100 borrowed and must be repaid in two weeks. If you cannot repay the loan in two weeks, it will roll over to a new payday loan with another finance charge. Assume there are 52 weeks in each year. You plan to borrow $400.
What is the APR of this loan?____%
What is the EAR of this loan?____%
5)
You have $5,600 that you want to use to open a savings account. There are five banks located in your area. The rates paid by banks A through E, respectively, are given below. What is the effective rate offered by each of the banks?
Bank A offers4.61 percent, compounded annually.
EARA=_____%
Bank B offers4.15percent, compounded monthly.
EARB=____%
Bank C offers4.57percent, compounded semiannually.
EARC=____%
Bank D offers4.10percent, compounded continuously.
EARD=____%
Bank E offers4.25%, compounded quarterly
EARD=____%
If your goal is to maximize your interest income, what should your account balance be after one year? (Be sure to use the full, unrounded interest rate in your calculation so your answer is precise).
$_____
6)
Kingston Development Corp. purchased a piece of property for $2.79 million. The firm paid a down payment of 15 percent in cash and financed the balance. The loan terms require monthly payments for 15years at an annual percentage rate of 7.75 percent, compounded monthly. What is the amount of each mortgage payment?
Payment = $_____
7)
This morning, you borrowed $9,500at 8.9 percent annual interest. You are to repay the loan principal plus all of the loan interest in one lump sum 4 years from today. How much will you have to repay?
$_____
8)
John's Auto Repair just took out a $52,000, 10-year, 8 percent, interest-only loan from the bank. Payments are made annually.
What is the amount of the loan payment in year 5?$____
What is the amount of the loan payment in year 10?_____
9)
On June 1, you borrowed $220,000to buy a house. The mortgage rate is 8.25 percent. The loan is to be repaid in equal monthly payments over 15 years. The first payment is due on July 1. Assume that each month is equal to 1/12 of a year.
How much of the second payment (on August 1) applies to the principal balance? $_____
How much of the second payment (on August 1) is interest? $______
How much of the third payment (on September 1) applies to the principal balance? $____
10)
You borrow $165,000to buy a house. The mortgage rate is 4.5 percent and the loan period is 30 years. Payments are made monthly. If you pay the mortgage according to the loan agreement, how much total interest will you pay?
Monthly payment = $_____
Total interest paid = $_____
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started