Time for a lump sum to double: If you deposit money today in an account that pays 6.5% annual interest, how long will it take to double your money?
Present and future values of a cash flow stream: An investment will pay $100 at the end of each of the next 3 years, $200 at the end of Year 4, $300 at the end of Year 5, and $500 at the end of Year 6. If other investments of equal risk earn 8% annually, what is its
Loan amortization and EAR: You want to buy a car, and a local bank will lend you $20,000. The loan would be fully amortized over 5 years (60 months), and the nominal interest rate would be 12%, with interest paid monthly. What would be the monthly loan payment? What would be the loan’s EAR?
Present value of a perpetuity: What s the present value of a $100 perpetuity if the interest rate is 7%? If interest rates doubled to 14%, what would its present value be?
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