1) You have found three investment choices for a one-year deposit: 10% APR compounded monthly, 11% APR compounded annually, and 9% APR compounded daily. Comput the EAR for each investment choice. (Assume that there are 365 days in the year)

2) You have just purchased a home and taken out a $490,000 mortgage. The mortgage has a 30-year term with monthly payments and an APR of 4.88%. How much will you pay in interest and how much will you pay in principal during the first year? How much will you pay in interest and how much will you pay in principal during the 20th year? (ie: between 19 and 20 years from now)

3) You need a new car and the dealer has offered you a price of $20,000 with the following payment options (a) pay cash and receive a $2,000 rebate, or (b) pay a $5,000 down payment and finance the rest with a 0% APR load over 30 months. But having just quit your job and started an MBA program you are in debt and you expect to be in debt for at least the next 2 1/2 years. You plan to use credit cards to pay your expenses; luckily you have one with a low (fixed) rate of 14.67% APR. Which payment option is best for you? Your monthly discount rate is ___%?

4) The mortgage on your house is 5 years old. It required monthly payments of $1,450, had an original term of 30 years, and had an interest rate of 8% APR. You decide to refinance. The new mortgage had a 30-year term, requires monthly payments, and has an interest rate of 5.625% APR.

a) What monthly repayments will be required with the new loan?

b) If you still want to pay off the mortgage in 25 years, what monthly payment should you make after you refinance?

c) Suppose you are willing to continue marking monthly payments of $1,450. How long will it take you to pay off the mortgage after refinancing?

d) Suppose you are willing to continue marking monthly payments of $1,450 and want to pay the mortgage off in 25 years. How much additional cash can you borrow today as part of the refinancing?

5) Fred bought a boat and brags about the low 6.9% interest rate (APR, monthly compounding) he obtained from the dealer. The rate is even lower than the rate he could have obtained on his home equity laond (7.8%APR, monthly compounding) But if his tax rate is 28% and hte interest on the home equity loan is tax deductable, which loan is truly cheaper? The after-tax cost on the home equity loan is___%

6) Your friend has a tax rate of 40% and has the following debts: car loan with an outstanding balance of $5,000 and a 4.81% APR (monthly compounding), credit cars with an outstanding balance of $10,000 and a 14.99% APR (monthly compounding), savings account with a $30,000 balance paying 5.43% EAR, Money market savings with $100,000 balance paying 5.28% APR (daily compounding), and a tax deductible home equity loand with an outstanding balance of $25,000 and a 5.07% APR (monthly compounding) Which saving account pays a higher after tax interest rate? Regular savings pays ___% Money Market pays ___%