1. Mike deposits 200 into a different savings account at time 0, which pays simple interest...

Transcribed Image Text:

1. Mike deposits 200 into a different savings account at time 0, which pays simple interest at an annual rate of 9.46%. What is the balance after 8 years? 2. Mike deposits 200 into a different savings account at time 0, which pays simple interest at an annual rate of 9.46%. What is the amount of interest earned during the last 6 months of the 8th year? Hint: What is the balance at 7.5 years. 3. Eric deposits 100 into a savings account at time 0, which pays interest (APR) at compounded semiannually. Eric and Mike earned the same amount of interest during the last 6 months of the 8th year. 4. How much interest will be earned in the next year on an investment paying 12% compounded annually if $100 was just credited to the account for interest? 5. If $120,000 is borrowed for a home mortgage, to be repaid at 9% interest over 30 years with annual payments of $11,680.36, how much interest (dollar amount and as opposed to return of capital) is paid in the last year of the loan? Hint: What is the amount of loan at beginning of last year? 6. Given the same present value, say $1, suppose three accounts paying EAR, APR(4), APR (0) respectively. Assume EAR = APR(4) = APR() = 1%, which one has higher future value? Given the same future value, say $1, suppose three accounts paying EAR, APR (4), APR (0) respectively. Assume EAR = APR (4) APR() = 1%, which one has higher present value? 7. 8. To achieve an annual return of 7%, an investment that is compounded semi-annually would need to earn how much every six months? Hint: The question is about interest rate. 9. What is the EAR (or APR compounded annually) equivalent to an APR of 7.5% compounded quarterly? 10. What is the EAR equivalent to an APR of 10% compounded continuously? 11. What is the APR compounded quarterly that is equivalent to an APR of 18% compounded monthly? 12. If the 5-year discount factor is 0.7008, what is the interest rate? Hint: discount factor is 1/d. 1. Mike deposits 200 into a different savings account at time 0, which pays simple interest at an annual rate of 9.46%. What is the balance after 8 years? 2. Mike deposits 200 into a different savings account at time 0, which pays simple interest at an annual rate of 9.46%. What is the amount of interest earned during the last 6 months of the 8th year? Hint: What is the balance at 7.5 years. 3. Eric deposits 100 into a savings account at time 0, which pays interest (APR) at compounded semiannually. Eric and Mike earned the same amount of interest during the last 6 months of the 8th year. 4. How much interest will be earned in the next year on an investment paying 12% compounded annually if $100 was just credited to the account for interest? 5. If $120,000 is borrowed for a home mortgage, to be repaid at 9% interest over 30 years with annual payments of $11,680.36, how much interest (dollar amount and as opposed to return of capital) is paid in the last year of the loan? Hint: What is the amount of loan at beginning of last year? 6. Given the same present value, say $1, suppose three accounts paying EAR, APR(4), APR (0) respectively. Assume EAR = APR(4) = APR() = 1%, which one has higher future value? Given the same future value, say $1, suppose three accounts paying EAR, APR (4), APR (0) respectively. Assume EAR = APR (4) APR() = 1%, which one has higher present value? 7. 8. To achieve an annual return of 7%, an investment that is compounded semi-annually would need to earn how much every six months? Hint: The question is about interest rate. 9. What is the EAR (or APR compounded annually) equivalent to an APR of 7.5% compounded quarterly? 10. What is the EAR equivalent to an APR of 10% compounded continuously? 11. What is the APR compounded quarterly that is equivalent to an APR of 18% compounded monthly? 12. If the 5-year discount factor is 0.7008, what is the interest rate? Hint: discount factor is 1/d.