My question is Q 23- Valuing perpetuities. Thank you
X ly. As a potential bom Wi l k would you go 15. APR LO41 Thic Corp, wants to earn an effective annual return mer loans of 16.5 per year. The bank uses daily compounding on What interest rate is the roytired by law to report to potential borrow- lain why this rate is mis t o an uninformed borrower. 16. Future Values is the future value of $2,400 in 17 years interest rate of 7.9 perce n pounded semiannually? 17. Calcetin Future Values fowier Credit Bank is offering 6.7 percent com- pounded daily on its savings accounts. If you deposit $7,000 today, how much will you have in the account in 5 years? In 10 years? In 20 years? 18. Calculating Present Values ILO1 An investment will pay you $65.000 in 10 years. If the appropriate discount rate is 7 percent compounded daily, what is the present value? 19. EAR versus APR LO4 Big Dom's Pawn Shop charges an interest rate of 32 percent per month on loans to its customers. Like all lenders, Big Dom must report an APR to consumers. What rate should the shop report? What is the effective annual rate? 20. Calculating Loan Payments (LO2, 4] You want to buy a new sports coupe for $79.500, and the finance office at the dealership has quoted you an APR of 5.8 per- cent for a 60-month loan to buy the car. What will your monthly payments be? What is the effective annual rate on this loan? 21. Calculating Number of Periods (LO3] 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 1.5 percent per month interest on the overdue bal ance. If the current balance is $18,000, how long will it take for the account to be paid off? 2. Calculating EAR LO4] Friendly's Quick Loans, Inc., offers you "three for four or 1 knock on your door." This means you get $3 today and repay $4 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? 23. Valuing Perpetuities (LO1 Live Forever Life Insurance Co. is selling a perpetuity contract that pays $1,400 monthly. The contract currently sells for $215,000. What is the monthly return on this investment vehicle? What is the APR? The effective annual return? 24. Calculating Annuity Future Values (LO1] You are planning to make monthly deposits of $450 into a retirement account that pays 10 percent interest compounded monthly. If your first deposit will be made one month from now, how large will your retirement account be in 30 years? 25. Calculating Annuity Future Values (LO1] In the previous problem, suppose you make $5.400 annual deposits into the same retirement account. How large will your account balance be in 30 years? 26. Calculating Annuity Present Values (L01] Beginning three months from now, you want to be able to withdraw $2,200 each quarter from your bank account to cover college expenses over the next four years. If the account pays.43 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
