1. Effective Arinual Rate (EAR) An coline trank is offering to pay 0.15% interest per month on deposits. Your local bank offers to poy 0.70% interest quarterly? (every 3 montiti). Which is thei higher interest rate? The EAR for the online bank is 3.8295% and the EAR for the local bank is 2.8149%. Therefore, the offer of 0.15% per month is higher; The EA2, for the online bank is 2.8295% and the EAR for the local bank is 1.8149%. Therefore, the offer of o. 15%6 per month is higher, The EAR foe the oelire bank is 0.8149% and the EAR for the local bank is 1.8295%. Therefore, the offer of 0.70% per quarter is tigher. The EAR for the orine bank is 1.B149\% and the EAR for the local bank is 2.8295%. Therefore, the offer of 0.70% per quarter is higher Sucpose Capital One is advertising a 60-month, 5.16% APR motorcycle loan. If you need to borrow $7,700 to purchase your dream tarley-Davidson, what will be your mianthly paryment? You have just taken out a $24,000 car loan with a 8% APR, compounded monthly. The loan is for five years. When you make your first payment in ane month, how much of the payment will go toward the principal of the loan? You have just taken euat a $2/4,000 car loan with a 8s APR, compounded monthily. The foan is for five years, When you make your tirst payment in one mionth, how migch of the paryment will go toward interest? What is the shape of the yeld curve given in the following term structure? What expectations are investors lkely to haver about future interest rated? 1 year - 1.97%, EAR 2 years - 2.42\% EAR 3 years 2.73%EAR 5 years 3.34% EAR 7 years 3.73% EAR 10 years 4.117 EAR 20 years =4.93% EAR. The vield curve is a nomal yield curve? (increasing). It is hard to toll because we are not given an EAR for every year. The yield curve is a flat yiehd curve. The yield curve is an inverted yield curve? (deareasing). 6. Various Interest Rate Measure You plan to buy a financial product today. You expect that the financial product will give you $150 at the end of first 6 years. Your requirind rate net return as 8%. What would be fair present value of this financial product? 7. Various Interest Rate Measure You nlan to buy a financial product today. You expect that the financial product will give you $300 at the end of first 6 years, If thit firanoal prickuct has an actual market price of $1,500, what is the expected rate of return for this firancial product? 5 hould you buy this fananosi product? The expected rate of return for this financial product is 7.4718%. If my required rate of retarn is higher than 7.471896,1 shcuid tiry this financal product, othenwise 1 should not buy. The expected rate of return for this financial product is 3.4718%. If my required rate of return is lower than 3.4718% s. 1 should not 60y this financial product, otherwise 1 should buy. The expected rate of return for this financial product is 3.4718%, If my recuired rate of return a higher than 3.4788%, thould buy thin fanancial product, otherwise I should not buy. The expected rate of return for this financial product is 5.4718%. If ny required rate of return is lower than 5.47189. ishould buy this lieancial product, ththerwise 1 should not buy. The expected rate of return for this financial product is 6.4718%. If my required rate of return is higher than 6.4718%,1 shoult buy this financial produch, otherwise 1 should not buy
