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Assignment I (Part A)

# Assignment I (Part A) - Assignment I(Part A COMM 308 This...

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Assignment I (Part A) COMM 308 This assignment is in two parts – Part A and Part B. Part B will be posted soon on First Class. Use only 4 decimals in your calculations. For example, a number like 0.6254% would be taken to be 0.0063. 1. Which of the following statements is true? I. David invested \$4,000 in a bank offering 5.5% per year. After 8 years, he will have \$6,138.75. II. Nancy promises to pay Emily \$30,000 after 5 years. If the interest rate is 4.5% per year, Emily would give Nancy \$24,073.53 now. A. I is true and II is false B. I is false and II is true C. Both I and II are true D. Both I and II are false 2. You would be receiving \$5,000 every 6 months for the next four years. What is the value of this cash flow in today’s dollars if the interest rate is 4.75% per year compounded continuously?

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3. You have to pay \$3,000 at the end of months 4, 6, 8, and 10. The interest rate is 10% per year compounded monthly. What is the present value of your obligation? 4. Which of the following statements is true? I. You have taken a \$200,000 loan from a bank which has to be repaid in 10 years. Assume that you have to make payments once a year. The bank charges 8% per year compounded monthly. Then, you have to make a yearly payment of \$22,384 to the bank. II. If a bank promises to double your money in 8 years, implicitly it is offering an interest rate of 9.05% per year. 5. If the effective annual rate is x%, then which of the following statements is true?
I. The effective rate for six months would be less than (x/2)% II. The effective rate for two years would be greater than (2x)% A. I is true, II is false B. I is false, II is true C. Both I and II are true D. Both I and II are false

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