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1. I am planning to give my son $200 a month for the four years that he will be at University of Michigan. At a
1. I am planning to give my son $200 a month for the four years that he will be at University of Michigan. At a discount rate of 6 percent, compounded monthly, how much should I have in my bank before my son first starts college?
A. $8,797.40
B. $8,409.56
C. $8,198.79
D. $8,516.06
E. $8,279.32
2. You would be making a wise decision if you chose to:
base decisions regarding investments on effective rates and base decisions regarding loans on annual percentage rates. |
assume all loans and investments are based on simple interest. |
accept the loan with the lower effective annual rate rather than the loan with the lower annual percentage rate. |
invest in an account paying 6 percent, compounded quarterly, rather than an account paying 6 percent, compounded monthly. |
ignore the effective rates and concentrate on the annual percentage rates for all transactions. |
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