Chapter 2 section 5

# Chapter 2 section 5 - on the loan payment at the end of two...

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Chapter 2, Section 5 15. Kelli loans 2000 to Adam today. Adam repays the loan by making two payments: One payment of 1500 at the end of two years and a second payment of 1200 at the end of four years. a. Calculate the interest rate on this loan from Adam’s standpoint. b. Calculate Kelli’s return on the loan assuming her reinvestment rate on the loan payment at the end of two years is 7%. c. Calculate Kelli’s return on the loan assuming her reinvestment rate
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Unformatted text preview: on the loan payment at the end of two years is 14%. 16. Claire loans 20,000 to Jim. Jim repays the loan with two payments of 12,000. One payment is made at the end of one year and the second payment is made at the end of two years. Claire reinvests the payment at time 1 at a reinvestment rate of i. Claire’s annual yield is 12%. Calculate i. Answers: 15. a. 11.1574% b. 9.8980% c. 12.0210% 17. 9.0667%...
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## This note was uploaded on 02/05/2012 for the course MA 373 taught by Professor Staff during the Spring '08 term at Purdue.

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