Determine what is the effective annual interest rate

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Question 1. Carrie Tune will receive $19,500 a year for the next 20 years as a result of the new song she has written. If a 10 percent rate is applied, should she be willing to sell out her future rights now for $160,000?

Question 2. You borrow money from a bank with annual interest rate 8% but it requires you to pay the interest monthly. What is the Effective Annual Interest rate( EFF)?

Question 3. Find the future value of the following annuities. The first payment in these annuities is made at the end of Year 1; that is, they are ordinary annuities. Assume that compounding occurs once a year.

a. $400 per year for 10 years at 10 percent.

b. $200 per year for 5 years at 5 percent.

c. Now rework parts a and b assuming that payments are made at the beginning of each year; that is, they are annuities due

Reference no: EM132545245

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