Periodic interest

rates.

You have a savings account in which you leave the funds for one year without adding to or withdrawing from the account. Which would you rather have: a daily compounded rate of

0.050%,

a weekly compounded rate of

0.305%,

a monthly compounded rate of

1.55%,

a quarterly compounded rater of

3.75%,

a semiannually compounded rate of

7.5%,

or an annually compounded rate of

15%?

EAR.

What is the effective annual rate (EAR) of a mortgage that is advertised at

10.5%

(APR) over the next twenty years and paid with

monthly

payments?

What is the effective annual rate (EAR) of the mortgage at

10.5%

APR with

monthly

payments?

nothing%

(Round to two decimal places.)

Present value with periodic

rates.

Sam Hinds, a local dentist, is going to remodel the dental reception area and add two new workstations. He has contacted A-Dec, and the new equipment and cabinetry will cost

$16,000.

The purchase will be financed with an interest rate of

9.5%

loan over

7

years. What will Sam have to pay for this equipment if the loan calls for

semiannual

payments

(2

per year) and

weekly

payments

(52

per year)? Compare the annual cash outflows of the two payments. Why does the

weekly

payment plan have less total cash outflow each year?

What will Sam have to pay for this equipment if the loan calls for

semiannual

payments

(2

per year)?

$nothing

(Round to the nearest cent.)