Homework 21 - your answer to the nearest 0.1 per year 4...

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Homework 21 1. A recent advertisement for a Dell computer is shown below. If you purchase the computer outright, you’ll pay $1443. If you purchase the computer using their purchase plan (and, thanks to good credit, get their lowest rate of $43/month) what will be the true cost of your loan? Express your answer as an APY. 2. The actual Dell advertisement (below) included the phrase “No payments for 90 days” which means your 45 monthly loan payments don’t start until the end of Month 3. Under this new repayment plan, what will be the true cost of your loan? Express your answer as an APY. Be sure to draw a cash flow diagram! 3. Karen purchased 100 shares of Google, Inc. (GOOG) on March 1, 2006 for $337.50 per share. Four years later, she sold those shares for $532.69 each. What was her annual return on investment? Give
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Unformatted text preview: your answer to the nearest 0.1% per year. 4. Kelvin purchased 100 shares of IBM, Inc. (IBM) on Feb 8, 2005 at $93.30 per share. That was the ex-dividend date for the first quarter of 2005, which means the day after the quarterly dividend was paid. Kelvin saw the stock market crash coming and sold his IBM shares on Aug. 6, 2008 (just after being paid his 14 th quarterly dividend), at a price of $128.81 per share. If the quarterly dividend during that time was $0.30 per share, what was Kelvin’s annual return on his IBM investment? 5. What if Kelvin hadn’t seen the crash coming? Assume he had to sell his shares on Feb. 6, 2009 (just two quarters later) at $91.47 per share. What would his annual return on investment have been? HINT: Start with an interest rate of zero and note that (P|F,0%,n) = 1 and (P|A,0%,n) = n....
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