Question $1($a$)$ Identify the main difference between effective and nominal rates of interest. $($Total $6$ marks$)($b$)$ Tonni is looking for a new car. The car that piqued her interest is a brand$-$new vehicle which would set her back $$120,000.$ She intends to apply for a $7-$year loan of $$80,000$ and has two options to choose from. $($i$)$ The first loan from Acme Financing charges a simple interest of $3\mathrm{.}5\%$ pa$.$ Apply the necessary tools to determine how much the loan would cost her a month? $($Total $7$ marks$)($ii$)$ The second loan from Zeta Loans is offering a compounded interest rate of $2\mathrm{.}6\%$ p$.$a$.$ monthly rest. Apply the correct tool to work out her monthly instalments. $($Total $7$ marks$)($iii$)$ Identify which financing plan would be better for Tonni and discuss how much she would save over the period of the loan. $($Total $5$ marks$)$Question $2$ In a recent financial review, Jeanne realised that she has for a long time put aside the inevitable, and that she should make provisions for her only son, James, who suffers from a severe form of deaf$-$blindness which also results in him having rather severe emotional swings. She has just passed her $41$st birthday, and feels that based on her job as a marketing manager, she will probably have about $24$ years to work, provided she is healthy enough to work until that age. Based on her current estimate, James would require a monthly upkeep cost of about $$3,500$ a month. This would include the cost of hiring a full$-$time nursing assistant. In addition to this, annual expenses for mobility devices and upkeeping a household that will be $$safe$$ for him is estimated to cost around $$15,000$ a year. This expense would be required for the duration of James$$ life. Based on recent literature concerning the matter, Jeanne would like to provide for $20$ years of provision for James in the event that she is no longer around to care for him. To be on the safe side, the general rate of inflation can be taken as $3\mathrm{.}5\%$ p$.$a$.$ Also, given that Jeanne is averagely risk averse, she expects to invest in investments that are equally distributed between bonds and stocks, giving a long term average return of about $5\%.$ a$)$ Employ the correct tools to determine how much funding Jeanne should prepare to fund James$$ living expenses for $20$ years. $($Total $12$ marks$)$ b$)$ Given that the cost of mobility devices and household upkeep inflates by a rate of $7\%$ p$.$a$.,$ employ the right tools to determine how much funds Jeanne would need to have to provide for James$$ mobility devices and household needs. $($Total $8$ marks$)$ c$)$ Present the correct type and amount of insurance Jeanne should use if budget is a concern. $($Total $5$ marks$)$