Question 3 Your bank offers you a car loan with an interest rate of 6%. You expect inflation to be 2%. What is the real interest rate on this loan ?
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Question 3
Your bank offers you a car loan with an interest rate of 6%. You expect inflation to be 2%. What is the real
interest rate on this loan
?
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- Your bank offers you a car loan with an interest rate of 6%. You expect inflation to be 2%. What is the real interest rate on this loan?Question 5.A bank has borrowing needs at timeT >0. Show that by combining an FRAtrade today with a libor loan at timeT, the bank can today lock in its interest cost forthe periodTtoT+α. Does the borrowing bank need to buy or sell the FRA to do this?What is the fixed rate that the bank locks in?Q5
- 6. Calculating simple interest and APR on a single-payment loan You are taking out a single-payment loan that uses the simple interest method to compute the finance charge. You need to figure out what your payment will be when the loan comes due. The equation to calculate the finance charge is: FsFs = P r t In the equation, FsFs is the finance charge for the loan. What are the other values? P is the amount of the loan. r is the stated rate of interest. t is the term of the loan in . You’re borrowing $4,000 for a year and a half with a stated annual interest rate of 10%. Complete the following table. (Note: Round your answers to the nearest dollar.)Help DendmndmflfSuppose that you want to take out a loan and that your local bank wants to charge you an annual real interest rate equal to 3%. Assuming that the annualized expected rate of inflation over the life of the loan is 1%, determine the nominal interest rate that the bank will charge you. What was the actual real interest rate on the loan if, over the life of the loan, actual inflation is 0.5%?
- Financila Management 1. PV of an ordinary annuity Suppose you have an opportunity to buy an annuity that pays $1,000 at the end of each year for 5 years, at a 6% interest rate. What is the most you should pay for the annuity? 2. FV of an ordinary annuity Suppose Sandra opens a bank account with 20 000 at the beginning of the year at an interest rate of 8%. If the first deposit is made today and then 3 additional payments, how much would be accumulated after 5 years? 3. FV of an ordinary annuity due An annuity makes 20 annual payments of $3,000 with the first payment coming today. What is the future value of this as of 20 years from now if the interest rate is 8%? 4. PV of a perpetuity What’s the present value of a perpetuity that pays $1500 per year if the appropriate interest rate is 15%? 5. PV of an uneven cash flow stream At a rate of 5%, what is the present value of the following cash flow stream? $0 at Time 0; $250 at the end of Year…QUESTION 3 Suppose you deposit $2.500 in a CD paying 8% interest, compounded every other month. How much will you have in the account after 15 years? Round your answer to the nearest cent. below is an example how to do problem mple 4 A certificate of deposit (CD) is a savings instrument that many banks offer. It usually gives a higher interest rate, but you cannot access your investment for a specified length of ime. Suppose you deposit $3000 in a CD paying 6% interest, compounded monthly. How much will you have in the accbunt after 20 years? In this example, Pa-$3000 1=0.06 -12 the initial deposit 6% annual rate 12 months in 1 year since we're looking for how much well have after 20 N=20 years 0.06 So P 3000 1+ 12 3D%2993061(round your answer to the nearest penny) %3D Let us compare the amount of money earned from compounding against the amount you would carn from simple interest Yars Simple Interest 6% compounded (S15 per month)monthly 0.5% each month 33900 $4800 $5700 $4046 55…help with the question of "which is better and why"?
- Question 4 > You want to buy a $199,000 home. You plan to pay 10% as a down payment, and take out a 30 year loan for the rest. a) How much is the loan amount going to be? b) What will your monthly payments be if the interest rate is 6%? c) What will your monthly payments be if the interest rate is 7%? > Nevt OestionPractice Question 2You need to borrow $800,000 to buy a house.You borrow the money from a bank via amortgage with a 25-year term. The mortgagerequires you to make monthly repayments, withthe first payment one month from now. If themonthly interest rate is 0.5%, work out the fairmonthly repayment that you will have to make.< A friend asks to borrow $51 from you and in return will pay you $54 in one year. If your bank is offering a 6.2% interest rate on deposits and loans: a. How much would you have in one year if you deposited the $51 instead? b. How much money could you borrow today if you pay the bank $54 in one year? c. Should you loan the money to your friend or deposit it in the bank?
