a.
To determine: The one year interest rate.
a.
Answer to Problem 13PS
The one year interest rate is 10.50%.
Explanation of Solution
Determine the one year interest rate
Therefore the one year interest rate is 10.50%.
b.
To determine: The two year discount factor.
b.
Answer to Problem 13PS
The two year discount factor is 0.8190.
Explanation of Solution
Determine the two year discount factor
Therefore the two year discount factor is 0.8190.
c.
To determine: The two year
c.
Answer to Problem 13PS
The two year
Explanation of Solution
Determine the two year
Therefore the two year annuity factor is 1.7240.
d.
To determine: The three year
d.
Answer to Problem 13PS
The three year
Explanation of Solution
Determine the three year
Therefore the three year annuity factor is 2.4650.
e.
To determine: The three year discount factor.
e.
Answer to Problem 13PS
The three year discount factor is 0.7410.
Explanation of Solution
Determine the three year discount factor
Therefore the three year discount factor is 0.7410.
Want to see more full solutions like this?
Chapter 2 Solutions
International Edition---principles Of Corporate Finance, 12th Edition
- Define the stated (quoted) or nominal rate INOM as well as the periodic rate IPER. Will the future value be larger or smaller if we compound an initial amount more often than annually—for example, every 6 months, or semiannually—holding the stated interest rate constant? Why? What is the future value of $100 after 5 years under 12% annual compounding? Semiannual compounding? Quarterly compounding? Monthly compounding? Daily compounding? What is the effective annual rate (EAR or EFF%)? What is the EFF% for a nominal rate of 12%, compounded semiannually? Compounded quarterly? Compounded monthly? Compounded daily?arrow_forwardCalculating interest earned and future value of savings account. If you put 6,000 in a savings account that pays interest at the rate of 3 percent, compounded annually, how much will you have in five years? (Hint: Use the future value formula.) How much interest will you earn during the five years? If you put 6,000 each year into a savings account that pays interest at the rate of 4 percent a year, how much would you have after five years?arrow_forwardCalculating and comparing add-on and simple interest loans. Eli Nelson is borrowing 10,000 for five years at 7 percent. Payments, which are made on a monthly basis, are determined using the add-on method. a. How much total interest will Eli pay on the loan if it is held for the full five-year term? b. What are Elis monthly payments? c. How much higher are the monthly payments under the add-on method than under the simple interest method?arrow_forward
- Pfin (with Mindtap, 1 Term Printed Access Card) (...FinanceISBN:9780357033609Author:Randall Billingsley, Lawrence J. Gitman, Michael D. JoehnkPublisher:Cengage Learning
- PFIN (with PFIN Online, 1 term (6 months) Printed...FinanceISBN:9781337117005Author:Randall Billingsley, Lawrence J. Gitman, Michael D. JoehnkPublisher:Cengage Learning