The number of compounding periods in one year is called compounding frequency. The compounding frequency affects both the present and future values of cash flows: An investor can invest money with a particular bank and earn a stated interest rate of 6.60%; however, interest will be compounded quarterly. What are the nominal, periodic, and effective interest rates for this investment opportunity? Rahul needs a bosn and is speaking to several lending agencies about the interest rates they would charge and the terms they offer. He partcularfy. Whes his local bank because he is being offered a nominal rate of 6%. But the bank is compounding monthly. What is the effective intereat rate that. Rahul would pay for the loan? 6.160%0.253%6.046%6.345% Rahul needs a loan and is speaking to several lending agencies about the interest rates they would charge and the terms they offer. He particularly likes his local bank because he is being offered a nominal rate of 6%. But the bank is compounding monthly. What is the effective interest rate that Rahul would pay for the loan? Another bank is also offering favorable terms, so Rahul decides to take a loan of $18,000 from this bank. He signs the loan contract at 10% compounded dally for three months. Based on a 365-day year, what is the total amount that Rahul owes the bank at the end of the loan's term? (Hint: To calculate the number of days, divide the number of months by 12 a od multiply by 365. ) $19,378.65$18,455.86$18,824,98$18,086.74 Mortgages, loans taken to purchase a property, involve regular payments at fixed intervals and are treated as reverse annuities, Mortgages are the reverse of annulties, because you get a lump-sum amount as a toan in the beginning, and then you make monthly payments to the lender. You've decided to buy a house that is valued at $1 million. You have $300,000 to use as a down payment on the house, and want to take out a mortgage for the remainder of the purchase price. Your bank has approved your $700,000 mortgsge, and is offering a standard 30 -year mortgage at a 10% fixed nominal interest rate (called the loan's annual percentage rate or ApR). Under this loan proposal, your mortgage payment will be per month. (Note: Round the final value of any interest rate used to four decimal places.) Your friends swiggest that you take a 15 -year mortgage, because a 30 -year mortgage is too long and you will pay a lot of money on interest. If your bank approves a 15 -year, $700,000 loan at a fixed nominal interest rate of 10% (APR), then the difference in the monthly payment of the 15 -year. mortgage and 30 -year mortgage will be (Note: Round the final value of any interest rate used to four decimal places: ) It is likely that you won't like the prospect of paying more money each month, but if you do take out a Is-year mortgage, you will make far fewer payments and will pay a lot less in interest. How much more total interest will you pay over the iffe of the loan if you cake out a 30 -year mortgage. instead of a 15 -year mortgage? $1,183,25837$857,433,60$1,011,771,65$1,097,515.01 It is likely that you won't like the prospect of paying more money each month, but if you do take out a 15 -year mortgage, you will make far fewer payments and will pay a lot less in interest. How much more total interest will you pay over the life of the loan if you take out a 30 -year mortgage instead of a 15-year mortgage? $1,183,258.37$857,433.60$1,011,771.65$1,097,515.01 Which of the following statements is not true about mortgages? Mortgages are examples of amortized loans. Mortgages always have a fixed nominal interest rate. The ending balance of an amortized loan contract will be zero. The payment allocated toward principal in an amortized loan is the residual balance - that is, the difference between total payment and the interest due. Calian Corporation issued 20-year, noncallable, 7,5% annual coupon bonds at their par value of $1,000 one year ago, Todey, the market interest rate on these bonds is 5.5%. What is the current price of the bonds, given that they now have 19 years to maturity? $1,113.48$1,142.03$1,171.32$1,201.35$1,232.15