Zebulon wants to borrow money. He writes a note that guarantees that 360 days from now he will give an amount of $1818.00 to whoever brings back the note to him. Yolanda wants to invest. She purchases the note from Zebulon. She pays $1800. After 30 days, Yolanda sells the notes to Walter for $1679.45. Walter keeps the note until maturity. (a) What is the simple interest rate earned by Yolanda? Note that negative rates may occur. When this happens it means that Yolanda lost money :( (b) What is the simple interest rate earned by Walter? (c) What is the simple interest rate at which Zebulon borrowed?

Zebulon wants to borrow money. He writes a note that guarantees that 360 days from now he will give an amount of $1818.00 to whoever brings back the note to him. Yolanda wants to invest. She purchases the note from Zebulon. She pays $1800. After 30 days, Yolanda sells the notes to Walter for $1679.45. Walter keeps the note until maturity. (a) What is the simple interest rate earned by Yolanda? Note that negative rates may occur. When this happens it means that Yolanda lost money :( (b) What is the simple interest rate earned by Walter? (c) What is the simple interest rate at which Zebulon borrowed?

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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1 ) Suppose that Smith is currently age 16. Smith’s parents pay $25,000 for the right to provide Smith with payments of $K every two months, beginning two months after his 18th birthday and continuing indefinitely. Assume that the nominal annual interest rate is i (6) = 9% until Smith turns age 21, at which point the rate changes to i (6) = 24% thereafter. Find $K.
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Vikrambhai
Zebulon wants to borrow money. He writes a note that guarantees that 360 days from now he will give an amount of $1818.00 to whoever brings back the note to him. Yolanda wants to invest. She ourchases the note from Zebulon. She pays $1800. After 30 days, Yolanda sells the notes to Walter for $1679.45. Walter keeps the note until maturity. (a) What is the simple interest rate earned by Yolanda? Note that negative rates may occur. When this happens it means that Yolanda lost money :( (b) What is the simple interest rate earned by Walter? (c) What is the simple interest rate at which Zebulon borrowed?
Suppose Eleanor is an avid reader and buys only mystery novels. Eleanor deposits $4,000 in a bank account that pays an annual nominal interest rate of 10%. Assume this interest rate is fixed-that is, it won't change over time. At the time of her deposit, a mystery novel is priced at $20.00. Initially, the purchasing power of Eleanor's $4,000 deposit is mystery novels. For each of the annual inflation rates given in the following table, first determine the new price of a mystery novel, assuming it rises at the rate of inflation. Then enter the corresponding purchasing power of Eleanor's deposit after one year in the first row of the table for each inflation rate. Finally, enter the value for the real interest rate at each of the given inflation rates. Hint: Round your answers in the first row down to the nearest mystery novel. For example, if you find that the deposit will cover 20.7 mystery novels, you would round the purchasing power down to 20 mystery novels under the assumption that…
5. Jim lends $8000 to Sally on September 23, 2006. Sally signs a promissory note, with the note due in 10 months. The maturity value of the note is $8695. Jim sells the note to a bank on February 23, 2007. If the bank wishes to earn 4%4%, what price does Jim get for the note?
14. Nadia takes out a loan of $150,000 to purchase an apartment. The loan is being charged a yearly interest rate of 2.5% applied monthly. Nadia is paying off the loan by making monthly payments of $500.00. (a) How much of Nadia's first payment goes towards paying interest and how much of it goes towards reducing the initial $150,000 loan amount? Show how you found your answers (b) Did Nadia reduce the loan amount she owed more in the first payment or the second payment? Justify.

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