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Finan Exam 2

Example Problems

QuestionAnswer
What is the EAR of 7% compounded monthly
What is the PV of an annuity that makes annual payments of $1,000 per year for 10 years if the required rate of return on the annuity is 12% compounded semi-annually?
What is the PV of an annuity that makes annual payments of $500 every 6 months for 10 years if the required rate of return on the annuity is 12% compounded semi-annually?
What is the value of $5000, 7 years from now if the money earns 11% compounded daily
You want to buy a new house. The house costs $450,000. You can get a 30 year loan with monthly payments to buy the house at an APR of 5.2% compounded monthly. If you take out the loan, what will your monthly payment be
Bought a house for $350,000. The mortgage on the house has an APR of 6.5% compounded monthly & requires monthly payments for 30 years. How much of your first mortgage payment will go to paying interest & how much will go to paying principal on the loan?
*retirement problem on slide 7 of ch6*
What is the value of $25,000 in five years if the money earns 5% compounded annually? What is the simple interest earned on this investment and what is the compound interest earned on this investment?
Today, your dream car costs $63,300. You feel that the price of the car will increase at an annual rate 1.7 percent. If you plan to wait 7 years to buy the car, how much will it cost at that time? (Assume annual compounding.)
Created by: lexi.welte
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