(a) An $8,000 loan calls for simple interest payments of 9 percent per year. Repayment of principal and all accumulated interest is to be made at the end of year 4. What amount needs to be repaid? (b) Assume the same loan as under (a), but with interest now compounded annually. How much needs to be repaid at the end of year 4? If your are told a cash flow occurs at "Year 5", then this means the cash flow occurs in This is the same as saying the cash flow occurs at the beginning of the the cash flow occurs at the end of the year. $8 million invested now will grow to year? years. year or that by the beginning of the sixteenth
(a) An $8,000 loan calls for simple interest payments of 9 percent per year. Repayment of principal and all accumulated interest is to be made at the end of year 4. What amount needs to be repaid? (b) Assume the same loan as under (a), but with interest now compounded annually. How much needs to be repaid at the end of year 4? If your are told a cash flow occurs at "Year 5", then this means the cash flow occurs in This is the same as saying the cash flow occurs at the beginning of the the cash flow occurs at the end of the year. $8 million invested now will grow to year? years. year or that by the beginning of the sixteenth
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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Transcribed Image Text:(a) An $8,000 loan calls for simple interest payments of 9 percent per year. Repayment of
principal and all accumulated interest is to be made at the end of year 4. What amount
needs to be repaid?
(b) Assume the same loan as under (a), but with interest now compounded annually.
How much needs to be repaid at the end of year 4?
If your are told a cash flow occurs at "Year 5", then this means the cash flow occurs in
This is the same as saying the cash flow occurs at the beginning of the
the cash flow occurs at the end of the
year.
$8 million invested now will grow to
year?
years.
year or that
by the beginning of the sixteenth
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