MA 373 F10 Test 1

# MA 373 F10 Test 1 - 1 Adam invests in a fund that earns 5...

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1. Adam invests in a fund that earns 5% over the next year. During that year, the rate of inflation is 8%. Calculate Adam’s real interest rate on his investment.

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2. Linda borrows 25,000 to buy a car. The loan will be repaid with 60 monthly payments of 634.84. Linda made all payments on time except that she skipped the payment at the end of the 24 th month. Calculate the outstanding loan balance at the end of the 36 th month right after the payment for that month.
3. Zheng has a choice between two perpetuities. One pays him 1000 at the end of each year. The other is an increasing perpetuity that pays him 500 at the end of the first year, 500 + Q at the end of the second year, 500 + 2Q at the end of the third year, etc. At an annual effective interest rate of 10%, the present value of each annuity is equal. Determine Q.

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Jenny invests 1000 in an account earning 0.01 t t . Ahmad invests 1000 in an account earning simple interest of s. At the end
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MA 373 F10 Test 1 - 1 Adam invests in a fund that earns 5...

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