b. 12% compounded monthly?
c. 8% compounded quarterly?
d. 18% compounded monthly?
e. 7% compounded continuously?
a. Left for nine yea s at 7% interest
b. Left for six years at 10% compounded semiannually
c. Left for five years at 8% compounded quarterly
d. Left for 10 years at 12% compounded monthly
a. You borrow $ 500 and repay $ 555 in one year.
b. You lend $ 1,850 and are repaid $ 2,078.66 in two years.
c. You lend $ 750 and are repaid $ 1,114.46 in five years with quarterly compounding.
0 and repay $ 21,364.24 in three years under monthly compounding.
( Note: In parts c and d, be sure to give your answer as the annual nominal rate.)
a. $ 856 grows into $ 1,122 at 7%
b. $ 450 grows into $ 725.50 at 12% compounded monthly
c. $ 5,000 grows into $ 6,724.44 at 10% compounded quarterly
a. What interest rate, to the nearest whole percentage, does she have to receive?
b. At that rate, how long will it take the money to triple?
c. If she cant find anything that pays more than 11%, approximately how long will it take to double her investment?
d. What kind of financial instruments do you think Sally is looking at? Are they risky? What could happen to Sallys investment?
a. How much were the bonds worth in 2007?
b. How much would they have been worth if they paid interest at a rate more like that paid during the 1970s and 80s, say 7%?
c. Comment on the difference between the answers to parts ( a) and ( b).
a. How much ahead will Joe be if he takes the banks offer and the investment does turn out to yield 18%?
b. How much behind will he be if the investment turns out to yield only 4%?
What interest rate would you need to get to have an annuity of $ 7,500 per year accumulate to $ 279,600 in 15 years?
How many years will it take for $ 850 per year to amount to $ 20,000 if the interest rate is 8%?
What would you pay for an annuity of $ 2,000 paid every six months for 12 years
A $ 10,000 car loan has payments of $ 361.52 per month for three years. What is the interest rate? Assume monthly compounding and give the answer in terms of an annual rate.
Joe Ferros uncle is going to give him $ 250 a month for the next two years starting today. If Joe banks every payment in an account paying 6% compounded monthly, how much will he have at the end of three years?
How long will it take a payment of $ 500 per quarter to amortize a loan of $ 8,000 at 16% compounded quarterly? Approximate your answer in terms of years and months. How much less time will it take if loan payments are made at the begin-ning of each quarter rather than at the end?
Ryan and Laurie Middleton just purchased their first home with a traditional ( monthly compounding and payments) 6% 30- year mortgage loan of $ 178,000.
a. How much is their monthly payment?
b. How much interest will they pay the first month?
Lee Childs is negotiating a contract to do some work for Haas Corp. over the next five years. Haas proposes to pay Lee $ 10,000 at the end of each of the third, fourth, and fifth years. No payments will be received prior to that time. If Lee dis-counts these payments at 8%, what is the contract worth to him today?
The Orion Corp. is evaluating a proposal for a new project. It will cost $ 50,000 to get the undertaking started. The project will then generate cash inflows of $ 20,000 in its first year and $ 16,000 per year in the next five years, after whichit will end. Orion uses an interest rate of 15% compounded annually for such evaluations.
a. Calculate the net present value ( NPV) of the project by treating the initial cost as a cash outflow ( a negative) in the present, and adding the present value of the subsequent cash inflows as positives.
b. What is the implication of a positive NPV? ( Words only.)
c. Suppose the inflows were somewhat lower, and the NPV turned out to be nega-tive. What would be the implication of that result? ( Words only.)
a. How much does Joe have to save in each year for the next 15 years to reach this goal?
b. How much would Joe have needed to save each year if he had started when retirement was 25 years away?
c. Comment on the difference between the results of parts a and b.