Chapter 1section9

# Chapter 1section9 - annual interest rate on Loan A is...

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Chapter 1, Section 1.9 38. Robert borrows 10,000. The loan to be repaid in three years has an annual compound discount rate of 8%. Calculate: a. The amount of cash that Robert will receive at time 0. b. The amount of discount that Robert will pay. c. The equivalent compound annual interest rate. 39. Colin invests 25,000 in an account that pays an interest rate equivalent to an annual compounded discount rate of 5%. Calculate the amount that Colin will have in his account at the end of 4 years. 40. Caleb wants to buy a new couch for his apartment. The couch costs 2000. The bank offers Caleb a 3 year loan with an annual discount rate of 12%. How much must Caleb borrow so that he has 2000 to buy the couch. (Note: This is the same as asking how much Caleb must repay at the end of 3 years.) 41. Katy has a choice between two three year loans. Loan A is subject to compound interest while Loan B is subject to compound discount. The

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Unformatted text preview: annual interest rate on Loan A is equivalent to the annual discount rate on Loan B. If Loan A is 2000, the amount of interest on that Katy will pay on Loan A is 662. Calculate the amount of discount that Katy will pay on Loan B is if the amount of Loan B is 1000. (Note: Under discount, the amount of the loan is the amount that must be repaid at the end of the loan, not the amount of cash received at the start of the loan.) 42. Book Problem 1.9, Number 7 43. Kevin invests 100 in a bank account earning a simple interest rate of 10%. James invests 100 in a bank account which earns an annual effective discount rate of d. At the end of 10 years, Kevin and James have the same amount of money in their accounts. Calculate d. Answers: 38. a. 7786.88 b. 2213.12 c. 8.69565% 39. 30,693.44 40. 2934.82 41. 248.69 42. i = 5.31137%; X = 2934.48 43. 6.6967%...
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Chapter 1section9 - annual interest rate on Loan A is...

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