Reference no: EM131862034

Please show equations so I can see how you arrived at the solution

Worksheet

1. You bought a car for $15,000. You gave the dealer $5,000 as a down payment. The balance will be financed with a 4 year loan with an interest rate of 5%. What will your monthly payment be?

N=

I=

PV=

PMT=

FV=

2. Calculate the effective annual rates for each of the following cases:

Stated Rate (APR) Number of Times Compounded Effective Rate (EAR)

7% Quarterly

12% Monthly 

6% Semiannually

3. You just bought a house for $150,000. You have agreed to make 5 payments at the end of the year for 5 years with an interest rate of 5%. What will the annual payment be? Show mw how to construct a loan amortization schedule.

1

2

3

4

5

4. A first-round draft choice quarterback has been signed to a three-year, $25 million contract. The details provide for an immediate cash bonus of $2 million. The player is to receive $5 million in salary at the end of the first year, $8 million the next, and $10 million at the end of last year. Assuming a 15% discount rate, is the package worth $25 million? If not, how much is it worth?

5. You are evaluating an investment from a large financial services firm. The investment promises an initial payment of $8,000 at the end of this year and subsequent payments that will grow at a rate of 4% annually. If you use a 7 % discount rate for investments like this, what is the value of this investment?