EBK FOUNDATIONS OF FINANCE
10th Edition
ISBN: 9780135160473
Author: KEOWN
Publisher: PEARSON CO
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Chapter 5, Problem 40SP
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After examining the various personal loan rates available to you, you find that you can borrow funds from a finance company at 8 percent compounded or from a bank at 9 percent compounded . Which alternative is more attractive?
(Compound interest with nonannual periods) After examining the various personal loan rates available to you,
you find that you can borrow funds from a finance company at an APR of 6 percent compounded weekly or
from a bank at an APR of 7 percent compounded quarterly. Which alternative is more attractive?
a. If you borrow $100 from a finance company at an APR of 6 percent compounded weekly for 1 year, how
much do you need to payoff the loan?
(Round to the nearest cent.)
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 = Amount of Loanx Interest Ratex Term of Loan
where FsFs is the finance charge for the loan, and the term of the loan is in .
You’re borrowing $10,000 for two years with a stated annual interest rate of 6%.
Chapter 5 Solutions
EBK FOUNDATIONS OF FINANCE
Ch. 5 - Prob. 1RQCh. 5 - The processes of discounting and compounding are...Ch. 5 - Prob. 3RQCh. 5 - Prob. 4RQCh. 5 - Prob. 5RQCh. 5 - Prob. 1SPCh. 5 - Prob. 2SPCh. 5 - Prob. 3SPCh. 5 - Prob. 4SPCh. 5 - Prob. 5SP
Ch. 5 - (Compound value) Stanford Simmons, who recently...Ch. 5 - (Future value) Sarah Wiggum would like to make a...Ch. 5 - Prob. 8SPCh. 5 - (Future value) Giancarlo Stanton hit 59 home runs...Ch. 5 - Prob. 10SPCh. 5 - Prob. 11SPCh. 5 - Prob. 12SPCh. 5 - Prob. 13SPCh. 5 - Prob. 14SPCh. 5 - Prob. 15SPCh. 5 - Prob. 16SPCh. 5 - Prob. 17SPCh. 5 - Prob. 18SPCh. 5 - Prob. 19SPCh. 5 - Prob. 20SPCh. 5 - Prob. 21SPCh. 5 - Prob. 22SPCh. 5 - Prob. 23SPCh. 5 - Prob. 24SPCh. 5 - (Solving for PMT of an annuity) To pay for your...Ch. 5 - Prob. 26SPCh. 5 - Prob. 27SPCh. 5 - (Loan amortization) On December 31, Beth Klemkosky...Ch. 5 - (Solving for r of an annuity) You lend a friend...Ch. 5 - Prob. 30SPCh. 5 - (Compound annuity) You plan on buying some...Ch. 5 - (Loan amortization) On December 31, Son-Nan Chen...Ch. 5 - (Loan amortization) To buy a new house you must...Ch. 5 - Prob. 34SPCh. 5 - Prob. 35SPCh. 5 - Prob. 36SPCh. 5 - Prob. 37SPCh. 5 - Prob. 38SPCh. 5 - (Compound interest uith nonannnal periods) a....Ch. 5 - (Compound interest with nonannual periods) After...Ch. 5 - Prob. 41SPCh. 5 - (Spreadsheet problem) To buy a new house you take...Ch. 5 - (Nonannual compounding using a calculator) Jesse...Ch. 5 - (Nonannual compounding using a calculator)...Ch. 5 - (Nonannual compounding using a calculator) Fords...Ch. 5 - Prob. 46SPCh. 5 - (Nonannual compounding using a calculator) Dennis...Ch. 5 - Prob. 48SPCh. 5 - (Calculating the effective annual rate) Youve just...Ch. 5 - Prob. 50SPCh. 5 - Prob. 51SPCh. 5 - (Present value) The Kumar Corporation is planning...Ch. 5 - (Perpetuities) What is the present value of the...Ch. 5 - (Complex present value) How much do you have to...Ch. 5 - (Complex present value) You would like to have...Ch. 5 - Prob. 56SPCh. 5 - Prob. 57SPCh. 5 - Prob. 58SPCh. 5 - Prob. 59SPCh. 5 - (Present value of a complex stream) Don Draper has...Ch. 5 - (Present value of a complex stream) Don Draper has...Ch. 5 - (Complex stream of cash flows) Roger Sterling has...Ch. 5 - (Future and present value using a calculator) In...Ch. 5 - Prob. 1MCCh. 5 - Prob. 2MCCh. 5 - Prob. 3MCCh. 5 - Prob. 4MCCh. 5 - Prob. 5MCCh. 5 - Prob. 6MCCh. 5 - Prob. 7MCCh. 5 - Prob. 8MCCh. 5 - Prob. 9MCCh. 5 - Prob. 10MCCh. 5 - Prob. 11MC
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- (Compound interest with nonannual periods) After examining the various personal loan rates available to you, you find that you can borrow funds from a finance company at an APR of 6 percent compounded quarterly or from a bank at an APR of 7 percent compounded monthly. Which alternative is more attractive? a. If you borrow $100 from a finance company at an APR of 6 percent compounded quarterly for 1 year, how much do you need to payoff the loan? $nothing (Round to the nearest cent.)arrow_forwardUsing the average interest rate for a federal loan of 2.75% AND the average interest rate for a private loan of 5.8%, calculate how long it'll take you to pay off both federal and private loan using the total cost from part 2. What would your monthly loan payments be (have realistic monthly loan payments as you would have other expenses)?arrow_forwardAfter examining the various personal loan rates available to you, you find that you can borrow funds from a finance company at 9% compounded weekly or from a bank at 10% compounded monthly. Which alternative is more attractive? If you can borrow funds from a finance company at 9% compounded weekly, the EAR for the loan is %arrow_forward
- After examining the various personal loanrates available toy, you find the can borrow funds from an investment company at 12%Compounded monthly or from a bank at 13% compounded annually. Which alternative is the most attractive?arrow_forwardI need help with answering question B: A car loan offered by Bank One requires quarterly payments and has an APR of 4.8 percent, whereas a the same loan amount may be obtained from Bank Two at an APR of 5 percent with monthly payments. Which loan would you choose and why?arrow_forwardAn advertised monthly lending rate of 9% is about 11% per year. This difference between an advertised rate and the annualized rate is based on finer TVM details that may be overlooked by borrowers. Discuss how you may have used TVM in a recent investment or loan decision and explain the TVM involved in your transaction. If you have not used TVM in the past financial transactions what practical TVM application would you expect to encounter in your future.arrow_forward
- Watch the Mathematics of Finance video and then answer the question given below. Simple interest loans are generally used for which type of loan? Click here to watch the video. Choose the correct description of a simple interest loan. A. Home Mortgage loans B. Short term loans of less than a year C. Car loans D. Long term loans of a year or morearrow_forwardAlso find B) The effective annual rate for the loan from your parents is (Round to two decimal places.) C)The option with the lower effective annual rate is ?arrow_forwardYou are considering taking out a loan from the so-called “Tiger B. Shark” finance company. The company’s leaflet states that the loan you plan to take will be settled on a “four-for-five” weekly basis. You ask your friend, who works in the banking industry, for advice on the following issues related to the loan. (a) What is the weekly interest rate charged on the loan as implied by the phrase “four-for-five weekly basis” in the leaflet? (b) What is the effective yearly rate of this loan? Assume that each year has exactly 52 weeks. (The final answer should be rounded to two decimal places in percentage.) (c) Suppose you plan to borrow $10,000 under the terms set out in the leaflet for one year (counted as 52 weeks according to the loan contract). (i) If you make no interest or principal repayments during the period, how much will you have to repay in 52 weeks and how much interest in total will you have to pay for the loan? [Note: Round the final answer to an…arrow_forward
- We will now verify your results using an online Amortization Calculator. Return to www.bankrate.com (Links to an external site.), scroll down the home page and select Amortization Calculator (Links to an external site.) under the Mortgages heading. Enter the amount, time, and rate for the original loan to begin with and click CALCULATE. Your monthly payments will appear on the side. Click Show Amortization Schedule to see the month-to-month breakdown of your loan payments over the entire term of the loan.arrow_forwardCalculating interest and APR of installment loan. Assuming that interest is the only finance charge, how much interest would be paid on a 5,000 installment loan to be repaid in 36 monthly installments of 166.10? What is the APR on this loan?arrow_forwardYou will usually have choices of interest rates and loan term when seeking a loan. For the following, calculate the monthly payment and total interest over the loan term with each option.You need a $20,000 to buy a used car. Your bank offers a 3 year loan at 5%, a 4 year loan at 6%, and a 5 year loan at 7%.3 year loan at 5%: Monthly payment: $ Total: $ Total interest: $ 4 year loan at 6%: Monthly payment: $ Total: $ Total interest: $ 5 year loan at 7%: Monthly payment: $ Total: $ Total interest: $arrow_forward
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