Question
Hello, If you could check my work to see if all the following answers are correct, that would be greatly appreciated. If one of them
Hello,
If you could check my work to see if all the following answers are correct, that would be greatly appreciated. If one of them is not correct, please provide a detailed solution so I may be able to solve similar problems in the future. Thank you very much in advance. IMPORTANT: Please, when you are providing your explanations, use formula's only. Please do not use excel. I must show all my work on exams using the formulas and a calculator.
Additionally, please be sure to provide me with the correct thought process, steps, and answers. All other answers provided have been wrong so far.
Thank you in advance for your understanding.
FIN 350 Business Finance Homework 2 Spring 2017 Due Date: April 13 1. You are seeking a loan to purchase some railroads. The Banker offers a loan with an APR of 15.2%, compounded semiannually. Your rich uncle, Milburn Pennybags, says he will offer you a loan with a 15% APR, with interest payments due every month What is the effective annual rate for each loan? Which is offering the better rate? 2. You have been offered a job with an unusual bonus structure. If you stay with the company, you will get an extra $20,000 every five years, starting five years from now What is the present value of this bonus if you plan to work for the company for 20 years and the interest rate is 6% (EAR)? 3. Suppose you work for Umpqua Bank and the senior managers want their 20-year commercial loans, which are compounded monthly, to have an EAR of 5.53% (a) A farmer comes to Umpqua Bank and asks for a 20-year, $80,000 commercial loan to purchase equipment. If his first payment is one month from now, what will his monthly payment be? (b) What is the APR of the loan? 4. Payday lending has seen regulatory and social scrutiny for charging high interest rates Google and Facebook have even banned advertisement of payday loans on their web- sites. A typical payday loan might allow you to borrow $100 today in exchange for $115 in two weeks. Assuming there are exactly 52 weeks in a year, what is the APR? What is the EAR? 5. You are researching two bonds. The first offers a nominal APR of 9%, compounded monthly. The other is "inflation-protected" and offers a real APR of 5%, compounded semi-annually. Assume that inflation is 4% APR, compounded annually. Which bond is offering the higher rate? 6. You want to create a scholarship that will pay $15,000 in real dollars per year forever The first payment for the scholarship is a year from now. You can earn an interest rate of 12% APR, compounded monthly, on your investments and inflation is 3% APR compounded annually. (a) What is the nominal effective annual rate (EAR) at which you can investStep by Step Solution
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