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Please answer these questions: You have a loan outstanding. It requires making 4 annual payments at the end of the next 4 years of $2,000
Please answer these questions:
You have a loan outstanding. It requires making 4 annual payments at the end of the next 4 years of $2,000 each. Your bank has offered to allow you to skip making the next 3 payments in lieu of making one large payment at the end of the loan's term in 4 years. If the interest rate on the loan is 2.72%, what final payment will the bank require you to make so that it is indifferent between the two forms of payment? The present value of the cash flows is $ (Round to the nearest dollar.) Your friend in mechanical engineering has invented a money machine. The main drawback of the machine is that it is slow. It takes one year to manufacture $200. However, once built, the machine will last forever and will require no maintenance. The machine can be built immediately, but it will cost $2,000 to build. Your friend wants to know if he should invest the money to construct it. If the interest rate is 14.0% per year, what should your friend do? The NPV of the machine is $ (Round to the nearest dollar.) Which do you prefer: a bank account that pays 9% per year (EAR) for three years or a. An account that pays 4.5% every six months for three years? b. An account that pays 13.5% every 18 months for three years? c. An account that pays 0.9% per month for three years? a. An account that pays 4.5% every six months for three years? If you deposit $1 into a bank account that pays 9% per year for three years, you will have $Step by Step Solution
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