Janis has borrowed $100,000 from the bank to buy a rare Pokmon card. Her debatable financial...

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Janis has borrowed $100,000 from the bank to buy a rare Pokémon card. Her debatable financial judgement aside, the bank has agreed to lend her this money at an interest rate of 13% p.a. effective. Janis has agreed to repay this loan over 2 years, using 8 level quarterly installments. The first installment is exactly 3 months from today. Using this information, answer the following questions. a) State clearly the type of effective rate that should be used in an annuity forinula for Janis' loan as described above (e.g. "effective quarterly rate", "cffective weekly rate", etc.). Then determine the value of this effective rate. (1 mark) b) Draw a cash flow diagram for Janis' loan described above, and then determine the size of the level repayment for Janis' loan. (2 marks) c) Suppose that Janis' first repayment was instead 2 months from today (the pay- ments are still quarterly). Without doing any further calculations, would you expect Janis quarterly repay ments to be larger or smaller than the amount caleulated in part b)? Justify your (1 mark) answer. Janis has borrowed $100,000 from the bank to buy a rare Pokémon card. Her debatable financial judgement aside, the bank has agreed to lend her this money at an interest rate of 13% p.a. effective. Janis has agreed to repay this loan over 2 years, using 8 level quarterly installments. The first installment is exactly 3 months from today. Using this information, answer the following questions. a) State clearly the type of effective rate that should be used in an annuity forinula for Janis' loan as described above (e.g. "effective quarterly rate", "cffective weekly rate", etc.). Then determine the value of this effective rate. (1 mark) b) Draw a cash flow diagram for Janis' loan described above, and then determine the size of the level repayment for Janis' loan. (2 marks) c) Suppose that Janis' first repayment was instead 2 months from today (the pay- ments are still quarterly). Without doing any further calculations, would you expect Janis quarterly repay ments to be larger or smaller than the amount caleulated in part b)? Justify your (1 mark) answer.

Answer rating: 100% (QA)

a Since payments are made quarterly we should Use e... View the full answer