20) A local finance company quotes a 16 percent interest rate on one-year loans. So, if you borrow $30,000, the interest for the year will be $4,800. Because you must repay a total of $34,800 in one year, the finance company requires you to pay $34,800/12, or $2,900.00, per month over the next 12 months. Is this a 16 percent loan? |
What rate would legally have to be quoted? (Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16)) |
What is the effective annual rate? (Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16)) | 19) An All-Pro defensive lineman is in contract negotiations. The team has offered the following salary structure: |
| Time | | | Salary | | | 0 | | $ | 7,000,000 | | | 1 | | $ | 5,600,000 | | | 2 | | $ | 6,100,000 | | | 3 | | $ | 6,600,000 | | | 4 | | $ | 8,000,000 | | | 5 | | $ | 8,700,000 | | | 6 | | $ | 9,500,000 | | |
All salaries are to be paid in lump sums. The player has asked you as his agent to renegotiate the terms. He wants a $10.5 million signing bonus payable today and a contract value increase of $2,500,000. He also wants an equal salary paid every three months, with the first paycheck three months from now. If the interest rate is 6 percent compounded daily, what is the amount of his quarterly check? Assume 365 days in a year. (Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16)) |
18) You are planning to save for retirement over the next 25 years. To do this, you will invest $760 a month in a stock account and $360 a month in a bond account. The return of the stock account is expected to be 9.6 percent, and the bond account will pay 5.6 percent. When you retire, you will combine your money into an account with a 6.6 percent return. |