Reference no: EM131523593
Question: Terry Martinez is considering taking out a loan to purchase a desk. The furniture store manager rarely finances purchases, but will for Terry "as a special favor." The rate will be 10% per year, and because the desk costs $600, the interest will come to $60 for a 1-year loan. Thus, the total price is $660, and Terry can pay it off in 12 installments of $55 each.
a. Use the interest rate of 10% per year to calculate the net present value of the loan. (Remember to convert to a monthly interest rate.) Based on this interest rate, should Terry accept the terms of the loan?
b. Look at this problem from the store manager's perspective. Using the interest rate of 10%, what is the net present value of the loan to the manager?
c. What is the net present value of the loan to the manager if an interest rate of 18% is used? What does this imply for the real rate of interest that Terry is being charged for the loan?
This kind of financing arrangement was widely practiced at one time, and you can see why from your answers to Question c. By law, lenders in the United States now must clearly state the actual annual percentage rate in the loan contract.
Calculate the net present value of a business deal
: Describe a decision problem that you have faced recently (or with which you are currently struggling). Describe the decision context and your objectives.
|
Find an interest rate that gives a net present value of zero
: Find the net present value of a project that has cash flows of -$12,000 in Year 1, +$5,000 in Years 2 and 3, -$2,000 in Year 4, and +$6,000 in Years 5 and 6.
|
Constitutional authority of agencies
: Based upon the Delegation Doctrine (any statute conferring excessive legislative power is invalid because it is unconstitutional to delegate powers).
|
Strategies for integrated homeland security intelligence
: Brief summary of an intelligence and information-sharing strategy, either by a specific agency or in general as it applies to intelligence and information.
|
What is the net present value of the loan to the manager
: Terry Martinez is considering taking out a loan to purchase a desk. The furniture store manager rarely finances purchases, but will for Terry "as a special.
|
Create an appropriate greeting and closing for each email
: Revise the two (2) emails below to remove problematic content and help these students construct polite, effective email messages instead
|
George faces challenges
: George, the new department supervisor, wondered if he couldn't have spent his retirement from the Navy in a more relaxed atmosphere.
|
What are the implications for building a requisite model
: Lynn Rasmussen is deciding what sports car to purchase. In reflecting about the situation, it becomes obvious that after a few years Lynn may elect to trade.
|
Ultra petroleum has earnings per share
: Ultra Petroleum (UPL) has earnings per share of $1.57 and a P/E ratio of 32.96. What’s the stock price?
|