more_TVM_problems - Finance 254 Yet Another Set of Time...

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Finance 254 Yet Another Set of Time Value of Money Problems Word to your mutha: Vanilla Ice is working on a new “artistic musical project”. If this album is the demonstration of genius everyone expects from a musician of his caliber, it will produce revenues of $12,000 at the end of each of the next five years, and then $3,000 per year in the six years that follow. If the appropriate annual discount rate is 12%, what is the current value of the revenues produced by this sure-to-be timeless masterpiece? 1 2003 Mitsubishi Eclipse RS: “I just talked to my manager, and he gave me the go-ahead on a special deal just for you . Because you are a very special client, we are going to let one of our Eclipses slip away at the following terms. ..” - No payments or interest for one year - Beginning the second year: $297/month for 60 months - A special interest rate (APR) of 3.9% - $2500 due at signing a. If 3.9% is APR, what is the true annual interest rate (what is the EAR)? b.
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