TVMpracticeset2

TVMpracticeset2 - TVM Practice Problems II 1. Nineteen...

Info iconThis preview shows pages 1–2. Sign up to view the full content.

View Full Document Right Arrow Icon
TVM Practice Problems II 1. Nineteen years ago, your grandfather placed $1,100 in a trust fund for you. The fund is now worth $13,438. a) What is the fund’s monthly rate of return? b) What is the fund’s rate of return if expressed on a yearly basis? 2. One of your friends has the kind of car that you have always wanted and she is hurting for money! This is your golden opportunity! You can purchase the 1979 Dodge Aries K (this baby is in mint condition) for a mere $1,900. There is only one problem -- you do not have the money right now. Your solution is to get the money from Jim’s Fast Cash. Jim agrees to lend you the $1,900 if you agree to repay the loan through 12 monthly payments of $190, to be paid at the end of each month. As your excitement builds, you ask Jim “what is the interest rate on the loan?” Jim replies, “your total payments are $2,280 ($190 * 12) and your loan principal is $1,900. The interest rate (A.P.R.) you are being charged is therefore $380 / $1,900 = 20%.” What is the effective annual rate (E.A.R.) on this loan?
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Image of page 2
This is the end of the preview. Sign up to access the rest of the document.

This note was uploaded on 01/13/2011 for the course BUS A202 taught by Professor Tindall during the Spring '10 term at IUPUI.

Page1 / 2

TVMpracticeset2 - TVM Practice Problems II 1. Nineteen...

This preview shows document pages 1 - 2. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online