You want to buy a house financed with a 15-year fixed-rate mortgage. The best interest rate you could find is 11% APR. Payment are made monthly, so the APR should be assumed to be a simple interest rate (i.e. the wrong thing) compounded monthly with no other adjustments.

What is the most you can borrow if you can only afford to pay $1,100 per month?

You've bought an inflation-adjusted annuity to give you a constant real income during your retirement years. The annuity will make 20 annual payments. The first payment of $80,000 will occur one year from now, and annual payments will increase at the rate of inflation, 3%, for 19 years and then stop. The interest rate is 9%.

What is the present value of these cash flows?

Your local loan shark offers weekly payday loans: You can borrow $1,000 and pay back $1,010 one week later. What is the effective annual rate (the right thing) on the loan? Again assume that that are exactly 52 weeks om the years.

A security pays $800 every 7 years forever. The appropriate discount rate is 6% (EAR). What is the value of the security if the first payment occurs 2 years from now?