3.A financial institution offers a nominal interest rate of 12% while compounding itsaccounts quarterly.a.b.DWhat is the effective interest rate?For how many years must quarterly deposits of $1,000 be made into thisaccount so that $100,000 will be accumulated at the end of this time?A retail outlet is being designed in a strip mall in Nebraska. For this outlet, theinstalled fiberglass insulation to protect against heat loss in the winter and heat gain in thesummer will cost an estimated $100,000. The annual savings in energy due to the insulation willbe $18,000 at EOY one in the 10-year life of the outlet, and these savings will increase by 12%each year thereafter. If the annual interest rate is 15%, is the cost of the proposed amount ofinsulation justified?

Effective Interest Rate: It refers to the annual rate of interest provided the effects of…

3. A financial institution offers a nominal interest rate of 12% while compounding its accounts quarterly. a. What is the effective interest rate? = b. For how many years must quarterly deposits of $1,000 be made into this account so that $100,000 will be accumulated at the end of this time?

3. A financial institution offers a nominal interest rate of 12% while compounding its accounts quarterly. a. What is the effective interest rate? = b. For how many years must quarterly deposits of $1,000 be made into this account so that $100,000 will be accumulated at the end of this time?

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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NOTE that significant marks will be lost if your answer does not include the NUMERICAL FORMULA. Question 1 ( Time Value of Money and WACC) (a) You need to pay off a car loan within the next two years. The payment will be $4,000 every month. Today you have made a single deposit into a return-guaranteed investment account that will allow you to cope with all the monthly payments. This account earns an effective annual interest rate of 12.68250301%. The first payment will be made in one month. (i) Calculate the corresponding monthly rate for the investment account. (ii) “You need to have at least $96,000 at your account today in order to make all the payments on the car loan in the next two years.” True or false? Briefly explain without doing any time value of money related (i.e. PVA or FVA) calculations. (iii) What is the amount of the single deposit made today? (iv) If your mother is going to make the first year’s repayments for you (as a birthday gift) and thus you don’t…
Columbia Bank & Trust has just given you a $20,000 term loan to pay for a new concrete mixer. The loan requires five equal annual end-of-the-year payments. If the loan provides the bank with a 12 percent return, what will be your annual payments? a. $5,547.85 b. $6,000 c. $3,148.12 d. $1,666.67
(a) You need to pay off a car loan within the next two years. The payment will be $4,000 everymonth. Today you have made a single deposit into a return-guaranteed investment accountthat will allow you to cope with all the monthly payments. This account earns an effectiveannual interest rate of 12.68250301%. The first payment will be made in one month.(i) Calculate the corresponding monthly rate for the investment account. (ii) “You need to have at least $96,000 at your account today in order to make all thepayments on the car loan in the next two years.” True or false? Briefly explain withoutdoing any time value of money related (i.e. PVA or FVA) calculations. (iii) What is the amount of the single deposit made today? (iv) If your mother is going to make the first year’s repayments for you (as a birthday gift)and thus you don’t need to withdraw the $4,000 every month from the investmentaccount, how much more money will you have in your bank account two years fromnow?
Suppose on January 1 you deposit $1000 in an account that pays a nominal, or quoted, interest rate of 12%, with interest added (compounded) daily. How much will you have in your account on October 1, or 9 months later? You want to buy a car, and a local bank will lend you $10,000. The loan would be fully amortized over 6 years (72 months), and the nominal interest rate would be 10%, with interest paid monthly. What is the monthly loan payment? While Mary Corens was a student at the University of Tennessee, she borrowed $20,000 in student loans at an annual interest rate of 5%. If Mary repays $200 per year, then how long (to the nearest year) will it take her to repay the loan?
The company is planning to purchase a new office building and will need to borrow $750,000. The loan will be repaid over 20 years and the bank is charging an interest rate of 7% annually. What will the MONTHLY loan payments be? (Round to 2 decimals) 70794.69 5899.56 5814.74 4956.52
A credit card holder has $12,000 on a credit card that charges a nominal annual rate of interest compounded 12 times a year. If the card holder wants to pay off the credit card in 6 years, how much will the card holder need to pay? Use this information to complete the following: 1) If the card holder is a low-risk customer, and the credit card company will charge 12.3% nominal annual rate of interest compounded 12 times a year. Compute: i. Monthly payment: | ii. Total amount of money the card holder will pay: iii. Total interest amount the credit card company will earn:
You have taken out a loan of $32,000 to buy a new Saturn. The loan will be paid off in monthly instalments starting in one month over the next 4 years (48 payments). The interest rate on the loan is a stated rate of 8.25% per year. The bank doesn’t tell you, but it is compounded quarterly. Find the amount of the monthly loan payment. Please show your work using PV formula
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Answer the questions below and show all working. Do not use excel: 1. A security pays you an annual amount of $900 for 10 years. The seller of the security requires the first payment to be made today and the last payment to be made 9 years from today. Interest rate on this security is 5.75 percent per annum. Calculate the present value rounded to 2 decimal places. 2. Investment promises to pay into an account that pays you 6 percent annually, $150 per month for the next twenty-two years. Suppose the first deposit into the account is made one month from today what is the value of the amount which will be in the account at the end ofthirty years? Rounded to 2 decimal places. 3. What will be the present value, if $5,400 is discounted back 4 years at an interest rate of 3% compounded semi-annually?

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