Washington-Pacific invested $4 million to buy a tract of land and plant some young pine trees. The trees can be harvested in 10 years, at which time W-P plans to sell the forest at an expected price of $8 million. What is W-Ps expected rate of return?

Universal Bank pays 7% interest, compounded annually, on time deposits. Regional Bank

pays 6% interest, compounded quarterly.

a. Based on effective interest rates, in which bank would you prefer to deposit your money?

b. Could your choice of banks be influenced by the fact that you might want to

withdraw your funds during the year as opposed to at the end of the year? In

answering this question, assume that funds must be left on deposit during an entire

compounding period in order for you to receive any interest.

4-18) Find the future values of the following ordinary annuities.

a.FV of $400 each 6 months for 5 years at a nominal rate of 12%, compounded semiannually

b.FV of $200 each 3 months for 5 years at a nominal rate of 12%, compounded quarte

c. The annuities described in parts a and b have the same total amount of money paid

into them during the 5-year period, and both earn interest at the same nominal rate,

yet the annuity in part b earns $101.75 more than the one in part a over the 5 years.

Why does this occur?

(4-16) Find the amount to which $500 will grow under each of the following conditions.

a.12% compounded annually for 5 years

a.($500 / 1.06) 5 =

b. 12% compounded semiannually for 5 years

c. 12% compounded quarterly for 5 years

d. 12% compounded monthly for 5 years

You want to buy a car, and a local bank will lend you $20,000. The loan would be fully

amortized over 5 years (60 months), and the nominal interest rate would be 12%, with

interest paid monthly. What is the monthly loan payment? What is the loan