Question: Calculating EAR. Friendlys Quick Loans, Inc., offers you three for four or I knock on your door. This means you get $3 today and repay

  1. Calculating EAR. Friendlys Quick Loans, Inc., offers you three for four or I knock on your door. This means you get $3 today and repay $4 when you get your paycheck in one week (or else). Whats the effective annual return Friendlys earns on this lending business? If you were brave enough to ask, what APR would Friendlys say you were paying?
  2. Valuing Perpetuities. Live Forever Life Insurance Co. is selling a perpetuity contract that pays $1,250 monthly. The contract currently sells for $245,000. What is the monthly return on this investment vehicle? What is the APR? The effective annual return?

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