1. You have found 3 investment choices for a one- year deposit: 3% APR compounded monthly, 3.1% APR compounded annually, and 2.9% compounded daily. Compute the EAR for each investment choice assuming there are 365 days in the year. Which invest choice should you choose? 2. You are looking to buy a car and you have been offered a loan with an APR of 6%, compounded monthly. a. What is the true monthly rate of interest (discount rate for monthly cash flows)? b. What is the EAR? 3. A payday loan is structured to obscure the true interest rate you are paying. For example, in Washington, you pay a $30 "fee" for a two-week $200 payday loan (when you repay the loan, you pay $230). What is the effective annual interest rate for this loan? 4. You have just taken out a $20,000 car loan with a 6% APR, compounded monthly. The loan is for five years. When you make your first payment in one month, how much of the payment will go toward the principal of the loan and how much will go toward interest? 5. You have decided to refinance your mortgage. You plan to borrow whatever is outstanding on your current mortgage. The current monthly payment is $2356 and you have made every payment on time. The original term of the mortgage was 30 years, and the mortgage is exactly four years and eight months old. You have just made your monthly payment. The mortgage interest rate is 6.375% (APR). How much do you owe on the mortgage today? 6. You are thinking about investing $5000 in your friend's landscaping business. Even though you know the investment is risky and you can't be sure, you expect your investment to be worth $5750 next year. You notice that the rate for one-year Treasury bills is 1%. However, you feel that other investments of equal risk to your friend's landscape business offer a 10% expected return for the year. What is your return from this investment? What is your opportunity cost of capital in this case? Should you invest in your friend's landscaping business