3. A financial institution offers a nominal interest rate of 12% while compounding its accounts quarterly. a. What is the effective interest rate? = b. For how many years must quarterly deposits of $1,000 be made into this account so that $100,000 will be accumulated at the end of this time?
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- NOTE that significant marks will be lost if your answer does not include the NUMERICAL FORMULA. Question 1 ( Time Value of Money and WACC) (a) You need to pay off a car loan within the next two years. The payment will be $4,000 every month. Today you have made a single deposit into a return-guaranteed investment account that will allow you to cope with all the monthly payments. This account earns an effective annual interest rate of 12.68250301%. The first payment will be made in one month. (i) Calculate the corresponding monthly rate for the investment account. (ii) “You need to have at least $96,000 at your account today in order to make all the payments on the car loan in the next two years.” True or false? Briefly explain without doing any time value of money related (i.e. PVA or FVA) calculations. (iii) What is the amount of the single deposit made today? (iv) If your mother is going to make the first year’s repayments for you (as a birthday gift) and thus you don’t…(a) You need to pay off a car loan within the next two years. The payment will be $4,000 everymonth. Today you have made a single deposit into a return-guaranteed investment accountthat will allow you to cope with all the monthly payments. This account earns an effectiveannual interest rate of 12.68250301%. The first payment will be made in one month.(i) Calculate the corresponding monthly rate for the investment account. (ii) “You need to have at least $96,000 at your account today in order to make all thepayments on the car loan in the next two years.” True or false? Briefly explain withoutdoing any time value of money related (i.e. PVA or FVA) calculations. (iii) What is the amount of the single deposit made today? (iv) If your mother is going to make the first year’s repayments for you (as a birthday gift)and thus you don’t need to withdraw the $4,000 every month from the investmentaccount, how much more money will you have in your bank account two years fromnow?Suppose on January 1 you deposit $1000 in an account that pays a nominal, or quoted, interest rate of 12%, with interest added (compounded) daily. How much will you have in your account on October 1, or 9 months later? You want to buy a car, and a local bank will lend you $10,000. The loan would be fully amortized over 6 years (72 months), and the nominal interest rate would be 10%, with interest paid monthly. What is the monthly loan payment? While Mary Corens was a student at the University of Tennessee, she borrowed $20,000 in student loans at an annual interest rate of 5%. If Mary repays $200 per year, then how long (to the nearest year) will it take her to repay the loan?
- Columbia Bank & Trust has just given you a $20,000 term loan to pay for a new concrete mixer. The loan requires five equal annual end-of-the-year payments. If the loan provides the bank with a 12 percent return, what will be your annual payments? a. $5,547.85 b. $6,000 c. $3,148.12 d. $1,666.67The company is planning to purchase a new office building and will need to borrow $750,000. The loan will be repaid over 20 years and the bank is charging an interest rate of 7% annually. What will the MONTHLY loan payments be? (Round to 2 decimals) 70794.69 5899.56 5814.74 4956.52You have taken out a loan of $32,000 to buy a new Saturn. The loan will be paid off in monthly instalments starting in one month over the next 4 years (48 payments). The interest rate on the loan is a stated rate of 8.25% per year. The bank doesn’t tell you, but it is compounded quarterly. Find the amount of the monthly loan payment. Please show your work using PV formula
- A credit card holder has $12,000 on a credit card that charges a nominal annual rate of interest compounded 12 times a year. If the card holder wants to pay off the credit card in 6 years, how much will the card holder need to pay? Use this information to complete the following: 1) If the card holder is a low-risk customer, and the credit card company will charge 12.3% nominal annual rate of interest compounded 12 times a year. Compute: i. Monthly payment: | ii. Total amount of money the card holder will pay: iii. Total interest amount the credit card company will earn:2) Solve the following NPV problems: Problem 1 . Suppose that a borrower receives a 1,000 euro loan from Bank A, with a 10-year maturity at an annual interest rate of 5% with the obligation to pay the interest at the end of each year for the next 10 years. However, at the end of the 6th year, due to financial difficulties, he borrows from the same bank an additional 1,000 euros at an annual interest rate of 5% making the following agreement: a. not to pay any installment at the end of the next two years, i.e. the 7th and 8th year, and b. then pay an equal amount of interest for the next 8 years (i.e. from the end of the 9th year until the end of the 16th year) in order to fully repay the first as well as the second loan. It is requested to calculate the interest-rate installment of the loan that occurred after the restructuring. Problem 2. Suppose that parents make family planning to finance their child's studies and buy a car. The expected costs for studies are EUR 10 000 per year…models. (Round your answers to the nearest cent as needed.) 1. A building contractor gives a $15,500 promissory note to a plumber who has loaned him $15.500. The note is due in nine months with interest at 9.5%. Three months after the note is signed, the plumber sells it to a bank. If the bank gets a 10% return on its investment, how much will the plumber receive? Will it be enough to pay a bill for $15,850?
- A buyer is considering purchasing a 10-acre parcel in Peoria, Arizona for economic development. The parcel has a sales price of $720,000. The buyer agrees with the seller for purchasing the property with 15% down up front and paying off the balance in 12-months. If a bank is willing to provide 3% annual interest, compounded monthly, how much should the monthly deposit be into that account to pay off the desired balance to the seller?A bank is negotiating a loan. The loan can either be paid off as a lump sum of $140,000 at the end of five years, or as equal annual payments at the end of each of the next five years. If the interest rate on the loan is 10%, what annual payments should be made so that both forms of payment are equivalent? A.Pool-N-Patio World needs to borrow $70,000 to increase its inventory for the upcoming summer season. The owner is confident that he will sell most, if not all, of the new inventory during the summer, so he wishes to borrow the money for only four months. His bank has offered him a simple interest amortized loan at 7 3/4 % interest. (Round your answers to the nearest cent.) (a) Find the size of the monthly bank payment.$ (b) Prepare an amortization schedule for all four months of the loan. PaymentNumber PrincipalPortion InterestPortion TotalPayment BalanceDue 0 $ 1 $ $ $ $ 2 $ $ $ $ 3 $ $ $ $ 4 $ $ $ $