Homework 3
Effective and Nominal Interest
1.
I finance a car under the following terms:
Purchase Price:
$32,750
Interest Rate:
5.52% APR compounded monthly
Term:
7 years
Required Down Payment:
8.00%
What is the monthly payment?
Down Payment
$2,620.00
Amount financed
$30,130.00
Interest rate per period (month)
0.4600%
Future Value is implied to be $0 because the loan is to be paid in full.
Months
84
Monthly Payment
$433.26
2.
In 1. above, what is the monthly
payment if the interest rate is
5.52% APR compounded quarterly?
Months per year
12
Quarters per year
4
Effective interest rate per year
5.6353%
APR compounded monthly
5.4948%
Effective rate per month
0.4579%
Monthly Payment
$432.90
3. What nominal interest rate (APR) compounded monthly
will grow an initial deposit of
$1,800 to
$225,000
in
36 years
if I then make semiannual deposits of
$425.00 ?
Months per year
12
Semiannual periods per year
2
Semiannual periods
72
Interest rate per semiannual period
4.2395%
APR compounded semiannually
8.4789%
Effective rate per year
8.6587%
APR compounded monthly
8.3329%

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*Sign up*4. I make an initial deposit of
$5,200
followed by withdrawals of
$35.00 per month.
If the nominal APR is

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