1. What lump-sum amount of interest will be paid on a $10,000 loan that was made on August 1, 2004, and repaid on November 1, 2010, with ordinary simple interest of 7 % per year?

2. Draw a cash flow diagram for $10,500 being loaned out at an interest rate of 7% per year over a period of 6 years. How much simple interest would be repaid as a lump-sum amount at the end of the sixth year?

3. Compute the effective annual interest rate in each of these situations:

(a) 7% nominal interest compounded semiannually.

(b) 7% compounded quarterly.

(c) 7% compounded continuously.

(d) 7% compounded weekly.

Hint: You may use the following formulas in your calculations.

i = [1+ (r/m) ]^m-1;

4. Sixty monthly deposits are made into an account paying 7% nominal interest compounded monthly. If the objective of these deposits is to accumulate $100,000 by the end of the fifth year, what is the amount of each deposit?

Hint: You may use the following formulas in your calculations.

_m= r_m/m