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Unformatted text preview: , Jiayi, and Yinzhe are business partners. As part of their partnership, Haoran pays
Jiayi 100,000 today. Additionally, at the end of 5 years, Jiayi agrees to pay 120,000 to
Yinzhe. Finally, at the end of T years, Yinzhe pays Haoran a total of 172,800.
Using the bottom line approach, all three partners have the same annual yield.
Determine T . January 24, 2013 Chapter 2, Section 5
15. Josh loans 1000 to Duncan. Duncan agrees to repay the loan with two payments of 600. One
payment will be made at the end of three years and the other payment will be made at the end
of six years.
a. Determine the annual effective interest rate on this loan from Duncan’s viewpoint.
b. Calculate Josh’s annual return on this loan over the six year period assuming that he can reinvest repayments at an interest rate of 5%.
16. Connor makes a loan of 30,000 to John. John will repay the loan with payments of 10,000 at
the end of one year, 11,000 at the end of two years, and 12,000 at the end of three years.
Connor reinvests each payment at an...
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This note was uploaded on 10/10/2013 for the course MA 373 taught by Professor Staff during the Fall '08 term at Purdue University-West Lafayette.
- Fall '08