1.What\'s the (EAR) effective annual rate of 16 percent APR compounded quarterly

Question

1.What's the (EAR) effective annual rate of 16 percent APR compounded quarterly?

2. What is the total PRESENT VALUE now of two future cash flows if discounted at an 8% annual rate? Cash Flow received at t=3 is $6000, and at t=6 is $9000

3. At 8% annual compounding, what is the total Future Value at t=8 of the two Cash flows in Prob #2?

4. Starting at the end of this month, you begin saving $300 each month for the next 60 consecutive months and these funds earn 12% APR, compounded monthly. What
future amount (including interest) will you have accumulated by 60 months from now?

Explanation / Answer

1)

EAR = (1+ 0.16/4)^4 -1 = 16.99

2)

PV = 6000/1.08^3 + 9000/1.08^6 = 10434.52

3)

FV = 6000 * 1.08^5 + 9000 * 1.08^2 = 19313.57

4)

FV = 300 * ((1+0.12/12)^60 -1)/0.12/12

=24500.90

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