Fin 534

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Homework Chapter 4, Week 3 1. A $50,000 loan is to be amortized over 7 years, with annual end-of-year payments. Which of these statements is CORRECT? C. The proportion of each payment that represents interest as opposed to repayment of principal would be lower if the interest rate were lower. If the interest rate is low on a loan, the amount of repayment is low. 2. Which of the following statements is CORRECT? C. to solve for I, one must identify the value of I that causes the PV of the positive CFs to equal the absolute value of the PV of the negative CFs. This is, essentially, a trial-and-error procedure that is easy with a computer or financial calculator but quite difficult otherwise. I must say finding the PV (present…show more content…
They expect their investment account to earn 9%. How large must the annual payments at t = 5, 6, and 7 be to cover Ellen's anticipated college costs? D. $2,292.12 (12 350.5437/ (1, 09^3)) by 3 equal contributions: X*(1, 09^3) + X*(1, 09^2) + X*1, 09 = 9 536.8858, X = 2
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