Determine effective annual percentage interest rate on loans

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Reference no: EM131339029

1. What would you be willing to pay for a $1,000 bond paying $70 interest at the end of each year and maturing in 25 years if you wanted the bond to yield the following rates of return?

a. 5 percent

b. 7 percent

c. 12 percent

2. A life insurance company offers loans to its policyholders against the cash value of their policies at a (nominal) annual interest rate of 8 percent, compounded quarterly. Determine the effective annual percentage interest rate on these loans.

Reference no: EM131339029

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