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##### finance and data bank

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Question;Interest RatesMULTIPLE CHOICE QUESTIONS;5.1 Interest Rate Quotes and Adjustments;2);Which of the following equations is incorrect?;A);- 1= APR;B);Equivalent n-Period Discount Rate = (1 + r)n - 1;C);1 + EAR =;D);Interest Rate per Compounding Period =;3);The effective annual rate (EAR) for a loan with a stated;APR of 8% compounded monthly is closest to;A);8.30%;B);8.33%;C);8.00%;D);8.24%;4);The effective annual rate (EAR) for a loan with a stated;APR of 10% compounded quarterly is closest to;A);10.52%;B);10.25%;C);10.38%;D);10.00%;5);The effective annual rate (EAR) for a savings account with;a stated APR of 4% compounded daily is closest to;A);4.00%;B);4.10%;C);4.08%;D);4.06%;Use the table for the question(s) below.;Consider the following investment alternatives;Investment;Rate;Compounding;A;6.25%;Annual;B;6.10%;Daily;C;6.125;Quarterly;D;6.120;Monthly;6);Which alternative offers you the highest effective rate of;return?;A);Investment A;B);Investment B;C);Investment C;D);Investment D;l;You are purchasing a new home and need to borrow $250,000;from a mortgage lender. The mortgage;lender quotes you a rate of 6.25% APR for a 30-year fixed rate mortgage. The mortgage lender also tells you that if;you are willing to pay 2 points, they can offer you a lower rate of 6.0% APR;for a 30-year;fixed rate mortgage. One point is equal;to 1% of the loan value. So if you take;the lower rate and pay the points you will need to borrow an additional $5000;to cover points you are paying the lender.;17);Assuming you don't pay the points and borrow from the;mortgage lender at 6.25%, then your monthly mortgage payment (with payments;made at the end of the month) will be closest to;A);$1570;B);$1530;C);$1540;D);$1500;18);Assuming you pay the points and borrow from the mortgage;lender at 6.00%, then your monthly mortgage payment (with payments made at the;end of the month) will be closest to;A);$1540;B);$1530;C);$1570;D);$1500;Use the information for the question(s) below.;Two years ago you purchased a new SUV. You financed your SUV for 60 months (with;payments made at the end of the month) with a loan at 5.9% APR. You monthly payments are $617.16 and you have;just made your 24th monthly payment on your SUV.;19);The amount of your original loan is closest to;A);$37,000;B);$32,000;C);$20,300;D);$31,250;20);Assuming that you have made all of the first 24 payments on;time, then the outstanding principal balance on your SUV loan is closest to;A);$31,250;B);20,300;C);$19,200;D);$32,000;Use the information for the question(s) below.;22);You are in the process of purchasing a new automobile that;will cost you $25,000. The dealership is;offering you either a $1,000 rebate (applied toward the purchase price) or 3.9%;financing for 60 months (with payments made at the end of the month). You have been pre-approved for an auto loan through;your local credit union at an interest rate of 7.5% for 60 months. Should you take the $2000 rebate and finance;through your credit union or forgo the rebate and finance through the;dealership at the lower 3.9% APR?.;23);You are purchasing a new home and need to borrow $325,000;from a mortgage lender. The mortgage;lender quotes you a rate of 6. 5% APR for a 30-year fixed rate mortgage (with payments;made at the end of each month). The;mortgage lender also tells you that if you are willing to pay 1 point, they can;offer you a lower rate of 6.25% APR for a 30-year fixed rate mortgage. One point is equal to 1% of the loan;value. So if you take the lower rate and;pay the points you will need to borrow an additional $3250 to cover points you;are paying the lender. Assuming that you do not intend to prepay your mortgage;(pay off your mortgage early),are you;better off paying the 1 point and borrowing at 6.25% APR or just taking out the;loan at 6.5% without any points?;Use the information for the question(s) below.;Two years ago you purchased a new SUV. You financed your SUV for 60 months (with;payments made at the end of the month) with a loan at 5.9% APR. You monthly payments are $617.16 and you have;just made your 24th monthly payment on your SUV.;24);Assuming that you have made all of the first 24 payments on;time, then how much interest have you paid over the first two years of your;loan?

Paper#44971 | Written in 18-Jul-2015

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