Problem Set 2

Problem Set 2 - F301 - Financial Management 2010 Fall...

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F301 Page 1 of 4 Fall 2010 F301 - Financial Management 2010 Fall Problem Set 2 Assignments should be handed in on a separate sheet of paper. If you have multiple sheets, please staple your assignment together. Make sure questions are in order and professionally completed. Please show your work in a professional, businesslike fashion. It should be neither crowded nor illegibly tiny. Make this assignment look like something you could present to your boss. Full credit will only be given when you show your work. Show formulas and equations or calculator inputs (TVM keys). Read each question carefully. Be sure you know what you are being asked to solve for, and you are answering the question which is posed. Each part of each question is worth three points. Total possible points = 69. 1. On my farm loan, I have 15 yearly payments left. Each payment is $3400, and the next payment is due one year from today. If the interest rate as 5% compounded annually, what is the balance on my loan (present value today)? 2. That shiny, black, Mustang GT can be yours for just $43,000. The value of your trade-in is $8,000, and your trade-in will be your down payment. The remaining balance can be financed with a five-year car loan at an interest rate of 6.0% compounded monthly. What will be the amount of your monthly payment (at the end of each month)? I have $10,000 which I am going to invest in a 2-year Certificate of Deposit (CD) with a quoted rate of 4.0%. Use this information to answer questions 3, 4 and 5. 3. If the interest rate is compounded annually: a. What will this CD be worth when it matures (at the end of two years)? b. What is the effective annual rate? 4. If the interest rate is compounded monthly: a. What will this CD be worth when it matures? b. What is the effective annual rate? 5. If the interest rate is compounded daily: a. What will this CD be worth when it matures? b.
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This note was uploaded on 01/13/2011 for the course BUS A202 taught by Professor Tindall during the Spring '10 term at IUPUI.

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Problem Set 2 - F301 - Financial Management 2010 Fall...

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