2. What: Complete Case 9b on page 432 of the Vretta text. 3. Where: This assignment...

   

Transcribed Image Text:

2. What: Complete Case 9b on page 432 of the Vretta text. 3. Where: This assignment is completed out of class. 4. When: Please refer to the Course Schedule for the assignment due date. 5. How: The case study is to be completed in a Word document. Questions are to be solved showing the formula, substitution and final answer, as is expected on your tests. Formulas are to be entered in Word by selecting Insert, Equation and then using the equation palette in Microsoft Word to build the formulas. You may insert Excel tables for calculations if you like or simply type the values you calculated manually into the equations in Word. Either method will be accepted. Please write out the final answer to each question in a sentence and include an introduction to your case as well as the original questions. Borrowing to Start a Business Enea, a promising entrepreneur, was excited for being recognized as having the best business plan at her college's annual entrepreneurial competition. An angel investor was so impressed with her plan that he offered her a loan at 6% compounded semi-annually to start her designer clothing store. After two years, her business had savings of $80,654 and she used the entire amount to completely pay off her outstanding debt with the investor. a. What was the loan amount provided to her by the angel investor and what was the accumulated interest over the two- year period? b. What rate, compounded monthly, would have resulted in the same accumulated debt? c. If Enea did not pay any amount throughout the term and the interest rate had remained at 6% compounded semi- annually, how long (in years and days) will it take for the debt to reach $100,000? d. If she had obtained the same loan amount from a local bank, it would have accumulated to $80,654 in 18 months instead of two years. What is the interest rate compounded semi-annually charged by the local bank? e. Calculate the loan amount provided to her by the angel investor if the loan had been issued to her at an annually compounding frequency instead of a semi-annually compounding frequency. Compare your answer to (a) and determine what her savings would be. f. If her contract with the investor required that she settle all dues in two years, how much could she have borrowed initially if she was sure that she could repay $25,000 in one year and $40,000 at the end of two years? g. What was the size of the loan provided by the investor if she was charged 6% compounded semi-annually for the first year and 8% compounded quarterly for the second year, and it accumulated to $80,654 in two years? 2. What: Complete Case 9b on page 432 of the Vretta text. 3. Where: This assignment is completed out of class. 4. When: Please refer to the Course Schedule for the assignment due date. 5. How: The case study is to be completed in a Word document. Questions are to be solved showing the formula, substitution and final answer, as is expected on your tests. Formulas are to be entered in Word by selecting Insert, Equation and then using the equation palette in Microsoft Word to build the formulas. You may insert Excel tables for calculations if you like or simply type the values you calculated manually into the equations in Word. Either method will be accepted. Please write out the final answer to each question in a sentence and include an introduction to your case as well as the original questions. Borrowing to Start a Business Enea, a promising entrepreneur, was excited for being recognized as having the best business plan at her college's annual entrepreneurial competition. An angel investor was so impressed with her plan that he offered her a loan at 6% compounded semi-annually to start her designer clothing store. After two years, her business had savings of $80,654 and she used the entire amount to completely pay off her outstanding debt with the investor. a. What was the loan amount provided to her by the angel investor and what was the accumulated interest over the two- year period? b. What rate, compounded monthly, would have resulted in the same accumulated debt? c. If Enea did not pay any amount throughout the term and the interest rate had remained at 6% compounded semi- annually, how long (in years and days) will it take for the debt to reach $100,000? d. If she had obtained the same loan amount from a local bank, it would have accumulated to $80,654 in 18 months instead of two years. What is the interest rate compounded semi-annually charged by the local bank? e. Calculate the loan amount provided to her by the angel investor if the loan had been issued to her at an annually compounding frequency instead of a semi-annually compounding frequency. Compare your answer to (a) and determine what her savings would be. f. If her contract with the investor required that she settle all dues in two years, how much could she have borrowed initially if she was sure that she could repay $25,000 in one year and $40,000 at the end of two years? g. What was the size of the loan provided by the investor if she was charged 6% compounded semi-annually for the first year and 8% compounded quarterly for the second year, and it accumulated to $80,654 in two years?