A9. If the nominal rate of interest on a loan is 16.3% and interest is compounded monthly, what is the Annual Percentage Rate (APR)? Your answer should be accurate to three decimal places. (a) (b) Given an annual interest rate of 4.3%, what is the maximum amount one will be willing to pay now, as a lump sum, to obtain a pension of £6,720 per year for the next 9 years, if payments are made at end of each year? Your answer should be accurate to two decimal places.

A9. If the nominal rate of interest on a loan is 16.3% and interest is compounded monthly, what is the Annual Percentage Rate (APR)? Your answer should be accurate to three decimal places. (a) (b) Given an annual interest rate of 4.3%, what is the maximum amount one will be willing to pay now, as a lump sum, to obtain a pension of £6,720 per year for the next 9 years, if payments are made at end of each year? Your answer should be accurate to two decimal places.

Corporate Fin Focused Approach

5th Edition

ISBN:9781285660516

Author:EHRHARDT

Publisher:EHRHARDT

Chapter4: Time Value Of Money

Section4.17: Amortized Loans

Problem 1ST

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Concept explainers

Mortgages

A mortgage is a formal agreement in which a bank or other financial institution lends cash at interest in return for assuming the title to the debtor's property, on the condition that the obligation is paid in full.

Mortgage

The term "mortgage" is a type of loan that a borrower takes to maintain his house or any form of assets and he agrees to return the amount in a particular period of time to the lender usually in a series of regular equally monthly, quarterly, or half-yearly payments.

Question

If the nominal rate of interest on a loan is 16.3% and interest is compounded
monthly, what is the Annual Percentage Rate (APR)? Your answer should be
accurate to three decimal places.
A9.
(a)
Given an annual interest rate of 4.3%, what is the maximum amount one will
be willing to pay now, as a lump sum, to obtain a pension of £6,720 per year
for the next 9 years, if payments are made at end of each year? Your answer
should be accurate to two decimal places.
(b)

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