1. Suppose you borrow $16,000. The interest rate is 10%, and it requires 4 equal end-of-year payments. Set up an amortization schedule that shows the annual payments, interest payments, principal repayments, and beginning and ending loan balances. Round your answers to the nearest cent. If your answer is zero, enter "0". Year 1 2 3 4 $ $ $ $ Beginning Balance $ $ $ $ Payment $ $ $ $ Interest $ $ $ $ Repayment of Principal $ $ $ $ Ending Balance
1. Suppose you borrow $16,000. The interest rate is 10%, and it requires 4 equal end-of-year payments. Set up an amortization schedule that shows the annual payments, interest payments, principal repayments, and beginning and ending loan balances. Round your answers to the nearest cent. If your answer is zero, enter "0". Year 1 2 3 4 $ $ $ $ Beginning Balance $ $ $ $ Payment $ $ $ $ Interest $ $ $ $ Repayment of Principal $ $ $ $ Ending Balance
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Question
Transcribed Image Text:1. Suppose you borrow $16,000. The interest rate is 10%, and it requires 4 equal end-of-year payments. Set up an amortization schedule that shows the annual payments, interest payments, principal repayments, and beginning
and ending loan balances. Round your answers to the nearest cent. If your answer is zero, enter "0".
Year
1
2
3
4
$
$
$
$
Beginning
Balance
$
$
$
$
Payment
$
$
$
$
Interest
$
$
$
$
Repayment
of Principal
$
$
$
$
Ending
Balance
Transcribed Image Text:j. Find the PV and the FV of an investment that makes the following end-of-year payments. The interest rate is 10%.
Payment
$100
$300
$500
Round your answers to the nearest cent.
Year
1
2
3
PV of investment: $
FV of investment: $
k. Five banks offer nominal rates of 9% on deposits, but A pays interest annually, B pays semiannually, C pays quarterly, D pays monthly, and E pays daily. Assume 365 days in a year.
1. What effective annual rate does each bank pay? If you deposit $3,000 in each bank today, how much will you have in each bank at the end of 1 year? 2 years? Round your answers to two decimal places.
EAR
FV after 1 year
FV after 2 years
Nominal rate
$
$
Payment
$
A
A
B
%
$
$
$
%
B
B
с
%
2. If the TVM is the only consideration, what nominal rate will cause all of the banks to provide the same effective annual rate as Bank A? Round your answers to two decimal places.
$
%
$
$
с
C
3. Suppose you don't have the $3,000 but need it at the end of 1 year. You plan to make a series of deposits
How large must the payments be to each bank? Round your answers to the nearest cent.
D
%
D
$
$
%
D
$
frequently.
E
%
E
$
$
%
E
4. Even if the five banks provided the same effective annual rate, would a rational investor be indifferent between the banks?
It is more likely that an investor would prefer the bank that compounded
%
annually for A, semiannually for B, quarterly for C, monthly for D, and daily for E- with payments beginning today.
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