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3. Compounded value and compounded rate. a.

Question : 3. Compounded value and compounded rate. a. : 2435

3. Compounded value and compounded rate.

a. What would be the interest rate compounded value of one dollar in three years if the annual

b. nd is 3 percent in Year 1 and is expected to rise to 5 percent in Year 2 6 percent in at constant annual interest rate would produce the same compounded value over three years?

 

4. Alternative financing plans. a can purchase a car with one of the following two financing plans. You make down payment of S12,000 and 36 monthly payments of S400 starting immedi- ately. you can make 60 monthly payments of S492 starting next month without any down payment Which plan offers a better deal if the interest rate i

 

5. Annuity versus perpetuity. You have just read an advertisement stati "Pay us S100 a year for the ten ereafter in perpetuity. If this is a fair deal, years and we will pay you s100 a year th hat is the implied rate of interest?

6. aluing a loan A company borrowed $10 million for five years from Atlantic Bank.The company pays Atlantic Bank a fixed annual rate of 8 percent and must pay back the S10 mil- lion loan at the end of the borrowing period. A year has passed since the loan was made and Atlantic Bank wants to sell the loan to Pacific Bank.

a. If the interest rate is now 7 percent, what is the value of the loan?

b. What would be the value of the loan if the company was paying the bank 4 percent every six months instead of 8 percent per year?

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