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(a) Loan A: You borrow $10,000 today and will repay the loan with a $10,500 payment one year from now. Calculate the annual rate that underlies this loan, as well as the total interest paid on this loan. (Yes, the answers are simple.)
(b) Loan B: You borrow $10,000 today and will re- pay the loan with 12 end-of-month payments of $866.19. For practice, you might want to verify that a 7.2% APR un- derlies this loan. Calculate the total interest paid on this loan (irrespective of the timing of the cash flows and, thus, in blatant violation of time value of money).
(c) Which alternative would any rational, wealth-maximizing individual choose? If, on Loan B, a person skipped the monthly payments, accrued interest, and instead made a single payment one year from now, how much would he or she have to pay? The point of this question is to support your answer to part c (or maybe to reconsider it if you first had it wrong).
Calculate the net present value (NPV) for a 20-year project with an initial investment of $15,000 and a cash inflow of $2,000 per year.
Ceebros Builders is expanding very fast and is expected to grow at a rate of 25 percent for the next four years. The company recently paid a dividend of $3.60 but is not expected to pay any dividends for the next three years. In year 4 management exp..
As a jewelry store manager, you want to offer credit, with interest on outstanding balances paid monthly.
Define Purchasing Power Parity (PPP) theory. Based on PPP, would you expect the price of a TV to be the same in India as it is in Australia? Give reasons to justify your answer
How much in U.S. dollars will Ganado receive in 90 days with a forward market hedge? What transaction exposure hedge is in Ganado's best interest?
Given an EOQ model with shortages in which annual demand is 4,200 units, Co = $160, Cc = $7 per unit per year, and Cs = $25, what is the optimal stockout level?
The forecast for your firm indicates there's a 20% chance that Net Income will be $200,000, a 50% chance it will be $300,000, and a 30% chance it will be $400,000. Assume your firm is zero-growth and pays all its net income in dividends each year Als..
To purchase your home, you borrow $437,000 on a 30 year mortgage priced at 8.6%. As with most home mortgages, the loan requires monthly payments. You decide to pay an extra $310 each month. If you pay the extra amount each and every month, how many y..
Wendy invests $25 in Stock A and $75 in stock B. The expected returns of stock A and B are 10% and 4%, respectively. What is expected return of Wendy's portfoli
Improvements in quality of medical procedures often mean that cost per unit of output decreases, quality of life is improved;
Burnes, Inc. is a mature firm that is growing at a constant rate of 5.5 percent per year. what is the market value of the company's stock?
what is the current rate on a four-year Treasury security?
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