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Tes1Soln08

# Tes1Soln08 - 1 Huntington Bank offers an account that pays...

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(10) O O (6) (8) O O O (5) (4) O O (7) O (3) O (9) (2) (1) 1. Huntington Bank offers an account that pays 3%, compounded daily. Lafayette Bank offers an account with the same annual effective rate, but compounded twice a year. Lafayette Bank’s nominal interest rate is i% per year, compounded twice a year. Find i. AEF d 1 C .03 365 365 ; AEF := 1.030453346 2 \$ AEF 1 2 K 1 ; 0.030224958 2) You receive an award that pays \$1,000 at the beginning of year 0, \$2,000 at the beginning of year 1, and \$3,000 at the beginning of year 2. What is the present value of this award at 5% interest per year? i d .05; i := 0.05 1000 C 1 C i K 1 \$ 2000 C 1 C i K 2 \$ 3000 5625.850341 3) You borrow \$250,000 to buy a house. Compute the monthly payments on a 25 year loan at 5% interest, compounded monthly? i d .05 12 ; i := 0.004166666667 solve 1 C i 25 \$ 12 \$ 250000 K P \$ 1 C i 25 \$ 12 K 1 i = 0, P ; 1461.475045 4) On Jan. 1, 2007, you won a contest that pays \$400 dollars at the end of each month for the next 10 years together with an additional payment of \$100,000 at the end of the last month. Find the present value on Jan. 1, 2007 of this prize at 3% interest, compounded monthly?

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