MA373 F15 Quiz 2 Solutions

# MA373 F15 Quiz 2 Solutions - MATH 373 Quiz 2 Fall 2015 1...

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MATH 373 Quiz 2 Fall 2015 September 22, 2015 1. Rachel has 10,000 to invest. If she invests the money at Anderson Bank, she will earn an annual effective interest rate of i . At this interest rate, Rachel estimates, using the Rule of 72, that she would have 20,000 at the end of 12 years. Rachel decides that instead of investing at Anderson Bank, she will loan the 10,000 to Ian who will use it to buy a car. Ian agrees to repay the loan with 36 monthly payments based on an annual effective interest rate of i . Determine the monthly payment that Ian will make to Rachel. (12) 12 (12) 12 (12) 72 12 6% 1 (1 ) 12 1.06 (1 ) 12 0.04867551 12 10000 N=36 I/Y=0.580655 CPT PMT=303.4997385 i i i i i i PV  

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2. Nathan lends 5000 to Jake who agrees to repay the loan with three payments of 2000. The first payment will be at the end of 2 years, the second payment will be at the end of 3 years and the final payment will be at the end of 5 years. Nathan is able to reinvest each payment made by Jake at an annual effective interest rate of 10%.
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