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Assume that you will borrow $400, 000 from a bank that charges 4.5 percent interest compounded monthly and repay the loan with monthly equal payments at the end of each month over the next 15 years. How much will be the monthly payments? If you are given a choice of investing at 7.65 percent compounded annually or 7.50 percent compounded monthly, which would you prefer? Why?

Assume that you will borrow $400, 000 from a bank that charges 4.5 percent interest compounded monthly and repay the loan with monthly equal payments at the end of each month over the next 15 years. How much will be the monthly payments? If you are given a choice of investing at 7.65 percent compounded annually or 7.50 percent compounded monthly, which would you prefer? Why?

Essentials Of Investments
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
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Assume that you will borrow $400, 000 from a bank that charges 4.5 percent interest compounded monthly and repay the loan with monthly equal payments at the end of each month over the next 15 years. How much will be the monthly payments? If you are given a choice of investing at 7.65 percent compounded annually or 7.50 percent compounded monthly, which would you prefer? Why? How much must Jane invest today at 3.5 percent interest compounded quarterly to have $20, 400 in 6 years? What annual rate of return must Sam earn on your $150,000 to have $320, 000 in 10 years? If the discount rate is 4.5 percent, what is the present value of a perpetual cash flow on $1.150 per year? Mike will invest $1,500 at the end of each month for 8 years. If he can earn 6 percent compounded monthly, how much will he have in 8 years? Lisa is trying to decide how much she should pay for an investment that generates the following stream of future cash flows: Year Cash flow ($ ) 1 45,000 2 15,000 350,000 4 15,000 If the appropriate discount rate is 6 percent, how much should she pay today?

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