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Determine the equivalent discount rate

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Reference no: EM132806811

Question 1:

Your bank is offering you an account that will pay 23% interest in total for a? two-year deposit. Determine the equivalent discount rate for the following periods.

a. Six months: _________

b. One year: ________

c. One month: __________

Question 2:

Do the relevant calculations so you can indicate which you? prefer: a bank account that pays 4.2% per year? (EAR) for 3 years or

a. an account that pays 2.9% every 6 months for 3? years?

b. an account that pays 8.4% every 18 months for 3? years?

c. an account that pays 0.72% per month for 3? years?

Question 3:

You make monthly payments on your car loan. It has a quoted APR of 7.1% ?(monthly compounding). What percentage of the outstanding principal do you pay in interest each? month?

a) The percentage of the outstanding principal you pay in interest each month is __________%

Question 4:

Suppose Capital One is advertising a 60?-month, 5.44% APR motorcycle loan. If you need to borrow $9,100 to purchase your dream? Harley-Davidson, what will be your monthly? payment??

a) Your monthly payment will be ?$__________.

Question 5:

Suppose the Bank of Montreal is offering a? 30-year mortgage with an EAR of 4.500%. If you plan to borrow $350,000?, what will your monthly payment? be?

a) Your monthly payment will be $_____

Question 6:

You have credit card debt of $25,000 that has an APR? (monthly compounding) of 16%. Each month you pay the minimum monthly payment. You are required to pay only the outstanding interest. You have received an offer in the mail for an otherwise identical credit card with an APR of 12%. After considering all your? alternatives, you decide to switch? cards, roll over the outstanding balance on the old card into the new? card, and borrow additional money as well. How much can you borrow today on the new card without changing the minimum monthly payment you will be required to? pay?

a) You can borrow $__________ on the new card without changing the minimum monthly payment you will be required to pay.

Question 7:

If the rate of inflation is 5.5%?, what nominal interest rate is necessary for you to earn a 2.5% real interest rate on your? investment?

a) The nominal interest rate is _________%.

Reference no: EM132806811

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