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Suppose a bank offers to lend you $10,000 for 1 year on a loan contract that calls for you

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1. Suppose a bank offers to lend you $10,000 for 1 year on a loan contract that calls for you;to make interest payments of $250.00 at the end of each quarter and then pay off the;principal amount at the end of the year. What is the effective annual rate on the loan?;2. Your sister turned 35 today, and she is planning to save $7,000 per year for retirement;with the first deposit to be made one year from today. She will invest in a mutual fund;that's expected to provide a return of 7.5% per year. She plans to retire 30 years from;today, when she turns 65, and she expects to live for 25 years after retirement, to age 90.;Her first withdrawal will be made at the end of her first retirement year. Under these;assumptions, how much can she spend each year after she retires?;3. Suppose you borrowed $15,000 at a rate of 8.5% and must repay it in 5 equal installments;at the end of each of the next 5 years. How much would you still owe at the end of the;first year, that is, after you have made the first payment?;4. You want to go to Europe 5 years from now, and you can save $3,100 per year, beginning;one year from today. You plan to deposit the funds in a mutual fund that you think will;return 8.5% per year. Under these conditions, how much would you have 5 years from;now?;5. Bank A pays 4% interest compounded annually while bank B pays 3.5% compounded;daily. Which bank would you choose to deposit your money and why?

 

Paper#26858 | Written in 18-Jul-2015

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