Introduction to F. — Assignment 2

1422 WordsJan 29, 20136 Pages
Feedback — Assignment 2 You have submitted this Assignment on Sun 5 Aug 2012 2:32:29 AM PDT. You achieved a score of 90.00 out of 100.00. Please read all questions and instructions carefully. Note that you only need to enter answers in terms of numbers and without any symbols (including $, %, commas, etc.). Enter all dollars without decimals and all interest rates with up to two decimals. Read the syllabus for examples. The points for each question are listed in parentheses at the start of the question, and the total points for the entire assignment adds up to 100. Question 1 (5 points) Qin deposits his first paycheck in the bank. The annual interest rate is 12%, but interest is compounded quarterly. The EAR is: Your Answer Score…show more content…
Question 9 (15 points) You have been living in the house you bought 10 years ago for $300,000. At that time, you took out a loan for 80% of the house at a fixed rate 15-year loan at an annual stated rate of 9%. You have just paid off the 120th monthly payment. Interest rates have meanwhile dropped steadily to 6% per year, and you think it is finally time to refinance the remaining balance. But there is a catch. The fee to refinance your loan is $4,000. Should you refinance the remaining balance? How much would you save/lose if you decided to refinance? Your Answer Score Explanation (yes, gain 4647) 15.00 Correct. Good job as this is a complete problem. Total 15.00 / 15.00 Question Explanation This is an even more realistic version of the mortgage problem. Think carefully about time lines and relevant interest rates to make different calculations. Question 10 (15 points) You are interested in a new Ford Taurus. After visiting your Ford dealer, doing your research on the best leases available, you have three options. (i) Purchase the car for cash and receive a $1,500 cash rebate from Dealer A. The price of the car is $15,000. (ii) Lease the car from Dealer B. Under this option, you pay the dealer $500 now and $200 a month for each of the next 36 months (the first $200 payment occurs 1 month from today). After 36 months you may buy the car for $8,000. (iii) Purchase the car from Dealer C who will lend you the entire purchase price of the car for a

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