midterm FIN 5080

This produces a 106% error causing a very large range of possible values causing our results to be very imprecise.

Poor Dog, Inc. borrowed $135,000 from the bank today. They must repay this money over the next six years by making monthly payments of $2,215.10. What is the interest rate on the loan? Express your answer with annual compounding.

| |finance the balance. How much will each monthly loan payment be if they can borrow the necessary funds for 30 years at 9% per |

A) $0.03 B) None of the above answers is correct. C) $0.40 D) $3.00 E) $0.20 Answer: C

A person deposited $500 in a savings account that pays 5% annual interest that is compounded yearly. At the end of 10 years, how much money will be in the savings account? (Bluman, A. G. 2005, page 230).

We need to find out the amount insurance companies will pay to cover a patient's bills. Converting percentages to decimals (and back) is a handy math skill, and it’s essential if we want to understand patient bills. Most interest rates are quoted in terms of a percentage. But if we want to run calculations on that number, we’ll need to convert it to a

|in round-off errors. So, to avoid this, use as many decimal places as your calculator is capable of displaying. |

When doing calculations, it is important to not round too early. While the book recommends one or two extra figures kept for calculations, the course notebook recommends at minimum two extra figures. Additionally, the book rounds all intermediate steps in calculations to show proper significant figures throughout the problem, leading to some inaccuracies in the final digits of answers, while the course notebook recommends returning to the more precise, unrounded numbers for use in further calculations. To round, underestimate the final numbers 0, 1, 2, 3, and 4, so that if a digit is smaller than 5 it does not affect the remaining number. If a digit is larger than five (5, 6, 7, 8, 9), during rounding that number is dropped and one is added to the remaining number.

After the calculations you end up coming out with a rate of 14.87%. The third and final part of question three asks what rate you will need if the interest is compounded semiannually. All you have to do is double the amount of terms and you will come out with a lower number of 7.177%. Since the interest is compounded semiannually that means that you will need to times that number by two and you come out with your final number of 14.35%.

$2/ 1 = 2.0; so for FVF at 8 %, “t” is approximately 9 years.

2.22 0.54 69.91 7.39 99.07 54.00 116.51 113.84 3.01 1.03 0.63 0.54 6.32 1.49 38.21% 15.70% 8.59% 10.50% 23.85%

(5.3.278) As all

2.824 ≈

(20 − 110)/((20 − 110) + (10 − 80)) = 90/(90 + 70) = 9/16 = 0.5625

The $51,904.59 is the yearly payment of this car loan, and goes into the loan payment of the table. Hence, the amortisation table shows below: