Given a 6 percent interest rate, compute the present value of payments made in years 1, 2, 3, and 4 of $1,000, $1,200, $1,200, and $1,500.
Answer to relevant QuestionsGiven a 7 percent interest rate, compute the present value of payments made in years 1, 2, 3, and 4 of $1,000, $1,300, $1,300, and $1,400. A perpetuity pays $100 per year and interest rates are 7.5 percent. How much would its value change if interest rates increased to 9 percent? Did the value increase or decrease? What annual interest rate would you need to earn if you wanted a $600 per month contribution to grow to $45,000 in six years? To borrow $700, you are offered an add-on interest loan at 9 percent with 12 monthly payments. First, compute the 12 equal payments and then compute the EAR of the loan:A mortgage broker is offering a $183,900, 30-year mortgage with a teaser rate. In the first two years of the mortgage, the borrower makes monthly payments on only a 4 percent APR interest rate. After the second year, the ...
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