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TVM_QPs_FEb_24

# TVM_QPs_FEb_24 - annual rate What is the period rate on...

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Time Value of Money Question and Problems Class Hour: ______________________ Name: ______________________________ 1. You need \$15,000 for a new car. If you can deposit \$10,000 today into an account that pays an APR of 5.5% based on daily compounding, how long will it take for you to be able to buy the new car? What if a bank quote annual compounding, how long will it take? 7.37 years, 7.57 years 2. You want to buy a new sports coupe for \$73,800, and the finance office at the dealership has quoted you a 6.2 percent APR loan for 60 months to buy the car. What will your monthly payments be? What is the periodic rate on this loan? What is the effective annual rate on this loan? \$1,433.6 6.379% .5167% 3. Ricky Ripov’s Pawn Shop charges an interest rate of 15 percent per month on loans to its customers. Like all lenders, Ricky must report an APR to consumers. What rate should the shop report? What is the effective
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Unformatted text preview: annual rate? What is the period rate on this loan? 15% per month, 180%, 435% 4. You have just turned 30 years old, and have accepted the first job after earning the MBA. You want to contribute to the retirement account earning 7% per year, and you cannot withdraw until you retire on your 65 th birthday. After that point, you will need \$100,000 per year starting at the end of the first year of retirement and ending on your 100 th birthday. What is your annuity payment starting at the end of every year that you work? \$9,366 5. If you ran a bank, which rate would you rather advertise on monthly-compounded loans, the EAR or the APR? Which rate would you rather advertise on quarterly compounded savings accounts, the EAR or the APR? Explain. As a consumer, which would you prefer to see and why? APR EAR...
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