ISYE 3025 Exam 1B_Key

# ISYE 3025 Exam 1B_Key - 1[10 A graduating high school...

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[10] A graduating high school student decides to take a year off and work to save money for college. The student plans to invest all money earned in a savings account earning 4% interest compounded quarterly. The student hopes to have \$5,000 by the time school starts in 12 months. a) What is the nominal interest rate? (2 pt) Nominal interest rate=4% b) What is the periodic interest rate? (2 pt) Periodic interest rate=1% c) What is the effective interest rate? (3 pt) Effective interest rate=(1+periodic interest rate) 4 -1=1.04 4 – 1=4.1% d) How much equal amounts of money will the student have to pay each month? (3 pts) (1+i monthly ) 12 =(1+i eff ) i monthly =0.33% Payment per month=5000(A/F,0.33%,12)=409.1 2. [10] You just bought a used car for \$4,500. You would like to limit your monthly payments to \$100 each month for a period of two years. What down payments must you make to complete the purchase if the interest rate being charged on the loan is 6% compounded monthly? Monthly interest rate = 6/12=0.5%,

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ISYE 3025 Exam 1B_Key - 1[10 A graduating high school...

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