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Test1_10 - MATH/STAT 170 Test 1 A Last Name First Name...

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MATH/STAT 170 Test 1 A Last Name:__________________________________________ First Name:___________________________________________ Student ID:___________________________________________
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. I grade the work—not the answer. A correct answer with no supporting work is worth nothing. It is O.K. to use a financial calculator to check your answer. However, your work should be such that it is clear to me that you actually know how to find the answer “by hand.” 1) Huntington Bank offers an account that pays 5%, compounded daily. They decide to change to compounding four times a year. What interest rate should they offer to obtain the same annual effective rate as the original account? (7 pts)
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2) On January 1, I win a prize the pays $P at the beginning of each month for 10 years with the first payment starting immediately. Find $P given that the present value of my prize at 4% interest compounded monthly is $1,000,000. (8 pts)
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3) You borrow $5,000 at the beginning of year 1 at 4% annual effective interest. You pay $1000 at the end of year 1, and $2,000 at the end of year 2, $P at the end of year 3, $400 at the end of year 4, and $400 at the end of year 5, after which you owe nothing. Find P.
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