Reference no: EM132935460
Problem 1: Amy borrowed $12,000 at an annual simple interest rate of 10.5% and repaid the loan by paying a lump sum of $15,300. For how many years did she take out the loan?
Problem 2: A morning radio show offered the following four prizes as alternative prizes for one of its competitions. Assuming an 11% discount rate, which is the most valuable prize? (Show working to justify your answer.)
(a) $8,000 every year for 5 years, with the first amount paid at year 4.
(b) $5,500 every year for 4 years, with the first amount paid today?
(c) $1,800 every year, forever, with the first amount paid after 1 year.
(d) $1,000 now, $9,000 in 3 years, and $20,000 in 8 years.
(e) State the most valuable prize. (Give a reason for your choice.)
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