What is the value of the security

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Q1. You want to buy a house financed with a 15-year fixed-rate mortgage. The best interest rate you could find is 14% APR. Payments are made monthly, so the APR should be assumed to be a simple interest rate (i.e. the wrong thing) compounded monthly with no other adjustments. What is the most you can borrow if you can only afford to pay $1,400 per month?

Q2. Your local loan shark offers weekly payday loans: You can borrow $1,000 and pay back $1,040 one week later. What is the AIR (the simple rate) on the loan? (Assume that there are exactly 52 weeks in a year.)

Q3. A security pays $800 every 8 years forever. The appropriate discount rate is 9% (EAR). What is the value of the security if the first payment occurs 5 years from now?

Reference no: EM133174440

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