AutoSave On FIN 7020 Mid Term FS20 (without solutions) Saved Search zakaria Z ca File Home Insert Draw Design Layout References Mailings Review View Help Share Comments Calibri X out Copy Format Painter Clipboard - 11 A A A A BIUX, APA AaB ca ABLCHI AaBbcu AaBbc AaB Aabbccdcbcc 1 Heading 2 Normal 1 No Spac.. Heading 1 Peste FH Title Subtitle Subtle Em. Find Replace Select Editing Dictate Editor Sensitivity Fort IM Sensity Editor Paragraph Styles Answer the questions below. Each question is self-contained and independent from the others. 1. The stated annual interest rate is 2 percent, couponed continuously. What is the cquivalent cffective annual interest rate to 6 places past the decimal point) associated with this stated rate? Solution Ear - 11+2%/1141-0.02 Ear = Exp(0.2)-1 -1.0202-1=2.02% b. The effective monthly rate is .0025 (ie, a quarter of a percent per month). If you have a 30-year mortgage for $500,000 with monthly payments, what are your monthly payments? C. What is the present value fi.e., the value at t-U, where I counts years) of the following stream of payments if the effective annual interest rate is 03 (i.e., 3% per annum): The first payment of $100 is made in 10 years (att - 10). There are 10 more payments after that first payment that occur every 1.5 years. Each of these subsequent payments are 5% larger than the previous payment. d. You need to borrow $20,000 to buy a car. Bank A is charging you a stated rate of 4% compounded every month; you must make monthly payments for 5 years. Bank Bis charging you 3.9% compounded continuously, you also rrust make monthly payments for 5 years. Which deal do you like better: Bank A's or Bank B's? e. You need to borrow $20,000 to buy a car. Bank X is charging you a stated rate of 6% compounded every month; you must make monthly payments for 5 years. Bank Z is charging you 5.9% compounded continuously, you also must make monthly payments for 5 years. Which deal do you like better: Bank x's or Bank Z's? f. What is the present value of an annual payment stream that starts next year at $100 and grows 3% every year thereafter into the infinite future is the discount rate is an effective 5% per year? Page 2 of 11 1920 words DO Focus 1009 Type here to search OBI R 1 D 1221 AM 10/14/2020