# Quiz 1 - quarterly whereas Bank B offers to pay 12.4...

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8) n (.t tl Name: (1) A mortgage company offers to tend you \$100,000; the loan calls for 6Yo interest rate for20years. Computetheannual paymentfortheloan. (, ', l' ll', , r- '.1 \ ,-. , (2) PV of ordinary annuity is 'v\ than PV of annuity due. FV of annuity due is than FV of ordinary annuity. a. larger, larger b larger, smaller &Dsmaller, larger d. smaller, smaller (3) Hence, in case of loan payments, you prefer an account interest receipt, you prefer an E ordinary annuity, ordinary annuity [p ordinary annuity, annuity due c. annuity due, ordinary annuity d. annuity due, annuity due (4) Suppose you are about to choose one oftwo banks for your savings account. Bank A offers to pay l2 percent interest compounded

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Unformatted text preview: quarterly, whereas Bank B offers to pay 12.4 percent compounded annually. Compute EARs for both banks. Which bank is preferred? /' \ \ \ r'v (r * n''''.' tl : \ \'' , , 4-) , =o.lzrg \ i'', . For the saving i\.\ r\ ( *-\ r, =)LW \ /o \ \i, Single cash flow FVN : PV (r+r)N PV = FVr (t+r)' n, - m(rz") , =( ,',\o -, 'v = tp41+r) ' -l Pv ) Ordinary annuitY pv = pMrlr - (X * r)' 1 = "-.f t -rt *'l-' 1 ry=rMtl_ , l.---L , ) pMT : 'n'r! or PMT = ' PY;' rrurt - (1.4t { vL r rv'L l-(X*)' 1y'= Annuity due ,r- PMTI(\+r)'-\(1+r) r PY : PMrlt - r)1 *'t'l u * "' l'l EAR EAR =(,. #)' -t , APR = *({t * EAR)'.' -1)-1-...
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## This note was uploaded on 09/08/2010 for the course BUS 173A at San Jose State.

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Quiz 1 - quarterly whereas Bank B offers to pay 12.4...

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