You have found three investment options for a one-year deposit: 10% compound APR monthly, 11% compound APR

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Question:

You have found three investment options for a one-year deposit: 10% compound APR monthly, 11% compound APR annually, and 9% compound APR daily. Calculate the EAR for each investment option. (Suppose there are 365 days in the year)

2) You just bought a home and got a $490,000 mortgage. The mortgage has a term of 30 years with monthly installments and an APR of 4.88%. How much will you pay in interest and how much will you pay in principal during the first year? How much will you pay in interest and how much will you pay in principal during the twentieth year? (i.e. between 19 and 20 years from now)

3) You need a new car and the dealer has offered you a price of $20,000 with the following payment options (a) pay cash and receive a $2,000 rebate, or (b) pay a $5,000 down payment and finance the remainder with a 0% APR load greater than 30 months. But after you've quit your job and started an MBA program, you're in debt and expect to be in debt for at least the next 2 14/67 years. You plan to use credit cards to pay for your expenses; luckily you have one with a low (fixed) rate of % APR. Which payment option is best for you? Is your monthly discount rate ___%?

4) Your home mortgage is 5 years old. It required monthly payments of $1,450, had an original term of 30 years, and had an interest rate of 8% APR. You decide to refinance. The new mortgage had a 30-year term, requires monthly payments and has an interest rate of 5.625% APR.

a) What monthly payments will be required with the new loan?

b) If you still want to pay off the mortgage in 25 years, what monthly payment do you need to make after refinancing?

c) Assume you are willing to keep making monthly payments of $1,450. How long will it take you to pay off the mortgage after refinancing?

d) Suppose you are willing to keep making monthly installments of $1,450 and want to pay off the mortgage in 25 years. How much additional cash can you borrow today as part of refinancing?

5) Fred bought a boat and boasts of the low interest rate of 6.9% (APR, monthly cap) he got from the dealership. The rate is even lower than the rate you could have gotten on your home equity loan (7.8% APR, monthly compounding) But if your tax rate is 28% and the interest on the home equity loan is tax deductible, which loan is really cheaper? The after-tax cost of the home equity loan es___%

6) Your friend has a 40% tax rate and has the following debts: car loan with an outstanding balance of $5,000 and an APR of 4.81% (monthly composition), credit cars with an outstanding balance of $10,000 and an APR of 14.99% compound), savings account with a balance of $30,000 paying 5.43% EAR, Money Market Savings with a balance of $100,000 paying 5.28% APR (compounded daily) and a tax-deductible home equity loan with an outstanding balance of $25,000 and 5.07% APR (compound monthly) Which savings account pays a higher after-tax interest rate? Regular savings pay ___% Money Market pays ___%