EAR versus APR. Ricky Ripov's Pawn Shop charges an interest rate of 17 percent per month on loans to its customers. Like all lenders, Ricky must report an APR to consumers. What rate should be shop report? What is the effective annual rate? Calculating Loan Payments. You want to buy a new sports coupe for $68, 500 and the finance office at the dealership has quoted you a loan with an APR of 5.9 for 60 months to buy the car. What will your monthly payments be? What is the effective annual rate on this loan? Calculating Number of Periods. One of your customers is delinquent on his accounts payable balance. You've mutually agreed to a repayment schedule of $500 per month. You will charge 1.4 percent per month interest on the over balance. If the current balance is $17, 340, how long will it take for the account to be paid off? Calculating EAR. Friendly's Quick Loans, Inc., offers you "Five for four, or I knock on your door." This means you get $4 today and repay $5 when you get your paycheck in one week (or else). What's the effective annual return Friendly's earns on this lending business? If you were brave enough to ask, what APR would Friendly's say you were paying? Valuing Perpetuities. Maybepay Life Insurance Co. is selling a perpetual annuity contract that pays $2, 500 monthly. The contract currently sells for $265,000. What is the monthly return on this investment vehicle? What is the APR? The effective annual return? Calculating Annuity Future Values. You are to make monthly deposits of $500 into a retirement account that pays 10.3 percent interest compounded monthly. If your first deposit will be made one month from now, how large will your retirement account be in 35 years? Calculating Annuity Future Value. In the previous problem, suppose you make $6,000 annual deposits into the same retirement account. How large will your account balance be in 35 years? Calculating Annuity Present Values. Beginning three months from now, you want to be able to withdraw $2, 100 each quarter from your bank account to cover college expenses over the next four years. If the account pays .45 percent interest per quarter, how much do you need to have in your bank account today to meet your expense needs over the next four years