Hi there,

I'm looking for this queaston but i'm not find? can you help me?

(What is the monthly rate of interest that will yield an EAR of 12%? What's the quarterly rate?)

ACCT 3380 - Time Value of Money 1. An investment requires an outlay of $100,000 today. Cash inflows from the investment are expected to be $40,000 per year at the end of years 4, 5, 6, 7 and 8. If you require a 20% EAR on this type of investment, should the investment be undertaken? Calculate the EAR on this investment. 2. What is the monthly rate of interest that will yield an EAR of 12%? What's the quarterly rate? 3. Which of the following do you prefer most if you expect 7% annual rate of return? A. Pay $100 now and receive $60 today and $60 in four years. B. Pay $200 now and receive $12 every year, forever. C. Pay $50 annually for five years, starting now, and receive $30 annually for twenty years, starting the end of the sixth year. D. Pay $50 now and receive $9 every other year, forever, with the first payment being next year. 4. In Aug. 2007, Irene Engels borrowed $50,000, and she borrowed another $50,000 in Aug. 2008, for Education. Her student loan has an annual interest rate of 2% compounded monthly. Irene didn't make any payments on her student loan until she started a lucrative job in Sep. 2009, when she started to make a payment of $1,000 at the end of every month. Now bonus time is coming near. For Jan. 2010, she plans to make another $1,000 payment (her 5th) and also apply her bonus to the loan. How big must her bonus be so that she will have completely paid-off the loan at the end of this Jan.? 5. You and two friends are considering to buy a house after graduation. You can get a 15-year fixedrate mortgage with 5% interest rate if you make a 20% down payment on the house. You will split the monthly mortgage payment equally between the three of you. Each of the three of you can afford to contribute up to $1,000 per month towards the mortgage payment. You each have $10,000 available towards the down payment. How expensive a house can you afford to buy? 6. You plan to retire 33 years from now. You expect that you will live 27 years after retiring. You want to have enough money upon reaching retirement age to withdraw $180,000 from the account at the beginning of each year you expect to live, and yet still have $2,500,000 left in the account at the time of your expected death (60 years from now). You plan to accumulate the retirement fund by making equal annual deposits at the end of each year for the next 33 years. You expect that you will be able to earn 12% EAR per year on your deposits. However, you only expect to earn 6% EAR per year on your investment after you retire since you will choose to place the money in less risky investments. What equal annual deposits must you make each year to reach your retirement goal? 7. You can buy a car for $40,000 cash and receive $2,500 cash-back or pay the total in 48 monthly instalments with 0% financing. Which option would you prefer if the market rate of interest is 4% APR, compounded quarterly. 8. You have $50,000 saved that you would like to invest in a rental property. The property would generate $1,000 of gross monthly rent and incur $400 in monthly expenses comprising of strata fees, property taxes, insurance & maintenance. A bank is willing to provide a standard 25-year mortgage at the current rate of 2.5% APR, but with the following two restrictions: Loan-to-Value (LTV) no greater than 80% and Debt Service Ratio (DSR) no less than 125%. If the property costs $160,000, then can you afford it? What if the bank offers 30-year mortgage but at 3% APR - does your answer change? In each case, calculate the maximum cost of the property that you can afford