A large entertainment company, let's call them Wisney! Ok, so Wisney is considering buying a new...

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A large entertainment company, let's call them Wisney! Ok, so Wisney is considering buying a new piece of land in the Everglades and planning to put a new campground...but make it fun! The land they are buying has a stipulation that nothing can be built on the property until it is paid in full. Wisney is wealthy and has cash available but due to COVID-19 is being a bit more conservative about spending large amounts of money on new projects, therefore they will take out a loan with a nominal rate of 4.65%. a) (5 points) What is the effective interest rate if the interest is compounded semi-annually and payment are made semi-annually? (Hint: The effective rate should be in the same period as the payment schedule) i. (5 points) If the land costs $2,500,000. What is the semi-annual payment needed to pay it off in 5 years? b) (5 points) What is the effective interest rate if the interest is compounded monthly and payments are made semi-annually? i. (5 points) If the land costs $2,500,000. What is the semi-annual payment needed to pay it off in 5 years? A large entertainment company, let's call them Wisney! Ok, so Wisney is considering buying a new piece of land in the Everglades and planning to put a new campground...but make it fun! The land they are buying has a stipulation that nothing can be built on the property until it is paid in full. Wisney is wealthy and has cash available but due to COVID-19 is being a bit more conservative about spending large amounts of money on new projects, therefore they will take out a loan with a nominal rate of 4.65%. a) (5 points) What is the effective interest rate if the interest is compounded semi-annually and payment are made semi-annually? (Hint: The effective rate should be in the same period as the payment schedule) i. (5 points) If the land costs $2,500,000. What is the semi-annual payment needed to pay it off in 5 years? b) (5 points) What is the effective interest rate if the interest is compounded monthly and payments are made semi-annually? i. (5 points) If the land costs $2,500,000. What is the semi-annual payment needed to pay it off in 5 years?

Answer rating: 100% (QA)

a To calculate the effective interest rate when the interest is compounded semiannually we can use the formula Effective interest rate 1 nominal rate ... View the full answer