1.Your mortgage statement says that your loan is at 4.68 percent APR, with month

Question

1.Your mortgage statement says that your loan is at 4.68 percent APR, with monthly payments. What is the effective annual rate on your mortgage (i.e., taking into account the monthly compounding)? Enter answer in percents, accurate to two decimal places.

2.You are being offered an investment that will pay you (and your heirs) $17,465 per year forever, starting 10 years from now. If your discount rate on this investment is 9.1 percent, how much would you be willing to pay for it today?

3.Today you deposit $8 thousand into an account paying 7% APR compounded daily. How much money will you have in the account 16 years from now?

4.6 years ago you started making annual deposits of $433 into an account paying 8% annual return. You continue to make these deposits every year without fail. If you keep doing this every year for the next 6 years, how much money will you have in 6 years?

5.You will receive $1,245 at the end each year in years 1 through 10, $2,362 in years 11 through 20, and $2,969 in years 21 through 30. How much is all this worth today, if the required rate of return is 3%?

6.Your friend just bought a new car for $28,843. You expect that the value of the car will decline by 6 percent every year. What will be the value of the car in 11 years?

7.Starting at the end of year 2, and every even-numbered year thereafter (i.e., year 4, 6, 8, ... etc.), you expect to receive $516. You will receive a total of 16 payments. What is the fair value of these cash flows today, if the going rate is 9 percent per year?

8.Your neighbor has gotten into some serious credit card debt, and currently owes $17,945 with an interest rate of 17% APR. Making the minimum payment of $440 per month, how long will it take to pay off this loan?Enter answer in months, to two decimal places.

Explanation / Answer

2. value of payment at end of the 10th year=$17,465/0.091=$191,923

Present value of payment=$191,923*Pv of 10 th year @9.1%=$191.923*0.4186=$80,331.29

6. the value of the car in 11 years=$28,843(1+.06)-11=$28,843*0.5258=$15,194.49

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