Problem 2-21 Discount factors and annuity factorsa. If the one-year discount factor is 0.9200, what is the one-year interest rate? (Do not round intermediate calculations. Enter youranswer as a percent rounded to 2 decimal places.)b. If the two-year interest rate is 8.7%, what is the two-year discount factor? (Do not round intermediate calculations. Round youranswer to 4 decimal places.)c. Given these one- and two-year discount factors, calculate the two-year annuity factor. (Do not round intermediate calculations.Round your answer to 4 decimal places.)d. If the PV of $10 a year for three years is $25.45, what is the three-year annuity factor? (Do not round intermediate calculations.Round your answer to 4 decimal places.)e. From your answers to (c) and (d), calculate the three-year discount factor. (Do not round intermediate calculations. Round youranswer to 4 decimal places.)a.Interest rate%b. Discount factorc. Annuity factord. Annuity factore.Discount factor

Answered: a. If the one-year discount factor is…

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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Which results in a lower total interest charge, borrowing $1 comma 5201,520 to be repaid 12 months later as a single-payment loan or borrowing $1 comma 5201,520 to be repaid as a 12-month installment loan? Assume a simple interest method of calculation at 11.5011.50 percent interest. Defend your answer. Note: Round intermediate computations to at least five (5) decimal places. Click on the table icon to view the Monthly Installment Loan Payment Factor (MILPF) table: 1. Question content area bottom Part 1 The amount of interest on the single-payment loan is $enter your response here. (Round to the nearest cent.) Part 2 The amount of interest on the 12-month installment loan is $enter your response here. (Round to the nearest cent.) Part 3 Why does the 12-month installment loan result in lower interest charges? (Select the best choice below.) A. Interest costs are higher when you have the use of the entire $1 comma 5201,520 for the full year…

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