a)

Your grandfather is retiring at the end of next year. He would like to ensure that his heirs receive payments of $10,100 a year forever, starting when he retires. If he can earn 9.4 percent annually, how much does your grandfather need to invest to produce the desired cash flow? (Round answer to 2 decimal places e.g. 15.25.)

Present value of investment

$_____________

b)

Gary King bought a Honda Civic for $17,345. He put down $6,000 and financed the rest through the dealer at an APR of 4.5 percent for four years. What is the effective annual interest rate (EAR) if the loan payments are made monthly? (Round answer to 2 decimal places e.g. 15.25%.)

Effective Annual interest rate _________%

c)

Daniel Jackson borrowed $15,550 from a bank for three years. If the quoted rate (APR) is 5.55 percent, and the compounding is daily, what is the effective annual interest rate (EAR)?

Effective Annual interest rate __________%