EBK CORPORATE FINANCE
4th Edition
ISBN: 8220103145947
Author: DeMarzo
Publisher: PEARSON
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Textbook Question
Chapter 5, Problem 5P
You are considering moving your money to a new bank offering a one-year CD that pays an 8% APR with monthly compounding. Your current bank's manager offers to match the rate you have been offered. The account at your current bank would pay interest every six months. How much interest will you need to earn every six months to match the CD?
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a) You are considering moving your money to a new bank offering a one-year GIC that
pays an 8% APR with monthly compounding. Your current bank offers to match the
rate you have been offered by the rival. The account at your bank would pay interest
every six months. What is the APR they should offer you to convince you to stay?
You have decided to start a savings plan for your retirement. You plan to make an
annual deposit of $50,000 each year for the next 6 years. The first deposit to be
made one year from today. The bank pays a nominal interest rate of 5% annually.
How much your savings account with the bank be if you leave the money in the bank
to be withdrawn all in 19 years from today?
Round to the nearest $0.01. DO NOT use the $sign. Do not use commas to separate thousands.
For example if you obtain $1,433.728 then enter 1433.73; if you obtain $432 then enter 432.00
Your Answer:
Answer
You have a balance of $8,000 on your credit card. The interest rate is 19% per year. You want to make equal monthly payment for the next 6 years to completely pay off the balance. Assume no other purchases or payments other than your calculated plan. What must be the amount of your monthly payment? Round to the nearest $ and use the $ symbol.
Chapter 5 Solutions
EBK CORPORATE FINANCE
Ch. 5.1 - Prob. 1CCCh. 5.1 - Prob. 2CCCh. 5.2 - How can you compute the outstanding balance on a...Ch. 5.2 - What is an amortizing loan?Ch. 5.3 - What is the difference between a nominal and real...Ch. 5.3 - How do investors expectations of future short-term...Ch. 5.4 - Prob. 1CCCh. 5.4 - How do taxes affect the interest earned on an...Ch. 5.5 - What is the opportunity cost of capital?Ch. 5.5 - Why do different interest rates exist, even in a...
Ch. 5 - Your bank is offering you an account that will pay...Ch. 5 - Which do you prefer: a bank account that pays 5%...Ch. 5 - Prob. 3PCh. 5 - Prob. 4PCh. 5 - You are considering moving your money to a new...Ch. 5 - Prob. 6PCh. 5 - Prob. 7PCh. 5 - You can earn 50 in interest on a 1000 deposit for...Ch. 5 - Prob. 9PCh. 5 - Prob. 10PCh. 5 - Prob. 11PCh. 5 - Prob. 12PCh. 5 - Prob. 13PCh. 5 - Prob. 14PCh. 5 - You have just sold your house for 1,000,000 in...Ch. 5 - Prob. 16PCh. 5 - Your mortgage has 25 years left, and has an APR of...Ch. 5 - Prob. 18PCh. 5 - Prob. 19PCh. 5 - Prob. 20PCh. 5 - Prob. 21PCh. 5 - Prob. 22PCh. 5 - The mortgage on your house is five years old. It...Ch. 5 - You have credit card debt of 25,000 that has an...Ch. 5 - Prob. 25PCh. 5 - Prob. 26PCh. 5 - Prob. 27PCh. 5 - Prob. 28PCh. 5 - Suppose the term structure of risk-free interest...Ch. 5 - Prob. 30PCh. 5 - Prob. 31PCh. 5 - Suppose the current one-year interest rate is 6%....Ch. 5 - Figure 5.4 shows that Johnson and Johnsons...Ch. 5 - Prob. 34PCh. 5 - Prob. 35PCh. 5 - Prob. 36PCh. 5 - Your best friend consults you for investment...Ch. 5 - Suppose you have outstanding debt with an 8%...Ch. 5 - In the summer of 2008, at Heathrow Airport in...Ch. 5 - Your firm is considering the purchase of a new...Ch. 5 - Prob. 41P
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Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.Similar questions
- Use the tables in Appendix B to answer the following questions. A. If you would like to accumulate $2,500 over the next 4 years when the interest rate is 15%, how much do you need to deposit in the account? B. If you place $6,200 in a savings account, how much will you have at the end of 7 years with a 12% interest rate? C. You invest $8,000 per year for 10 years at 12% interest, how much will you have at the end of 10 years? D. You win the lottery and can either receive $750,000 as a lump sum or $50,000 per year for 20 years. Assuming you can earn 8% interest, which do you recommend and why?arrow_forwardYou are considering moving your money to a new bank offering a one-year CD that pays an 8% APR with monthly compounding. Your current bank’s manager offers to match the rate you have been offered. The account at your current bank would pay interest every six months. How much interest will you need to earn every six months to match the CD?arrow_forwardYou are planning for your future by depositing lump sum into a time deposit account, what amount must be deposited at the present time so that you can withdraw $600 monthly for 5 years, with the first withdrawal scheduled for 5 years from today? The bank offers you 0.5% interest monthly. (Hint: Monthly withdrawals start at the end of the month 60).arrow_forward
- You plan to deposit $1,500 per year for 4 years into a money market account with an annual return of 3%. You plan to make your first deposit one year from today. What amount will be in your account at the end of 4 years? Do not round intermediate calculations. Round your answer to the nearest cent.$ Assume that your deposits will begin today. What amount will be in your account after 4 years? Do not round intermediate calculations. Round your answer to the nearest cent.$arrow_forwardYou plan to deposit $2,300 per year for 5 years into a money market account with an annual return of 2%. You plan to make your first deposit one year from today. What amount will be in your account at the end of 5 years? Do not round intermediate calculations. Round your answer to the nearest cent.arrow_forwardYou plan to deposit $2,300 per year for 5 years into a money market account with an annual return of 2%. You plan to make your first deposit one year from today. Assume that your deposits will begin today. What amount will be in your account after 5 years? Do not round intermediate calculations. Round your answer to the nearest cent.arrow_forward
- For the next two questions, assume the interest rate is 6% compounded annually. Use the online calculators. If you would like to receive $100 a year for five years, at the end of each year, how much do you need to place into the bank today? If you would like to receive $500 a year for five years, at the end of each year, how much do you need to place into the bank today?arrow_forwardYou are going to save $200 each month for three years so that you can put a down payment on a new car. If the monthly compound interest rate on your account is 0.25%, what is the largest down payment you can make at the end of three years (immediately after the last deposit)?arrow_forwardUse the following to answer the next two questions: You decide to be in saving for your retirement days. You begin with depositing $300 per month into a savings account that is earning 12% per year compounded monthly. You may deposit faithfully for 25 years at which time you'll retire. Your institution wants to keep your money and as an incentive begins paying 15% per year compounded monthly provided your delay, taking out any money for four years. After four years, you decide to begin withdrawing equal payments for the next 20 years. What are the equal monthly payments that you can withdraw if you want the account to last for 20 years?arrow_forward
- Jenny puts $200 into a savings account today, the account pays an annual interest rate of 5%, but compounded semiannually, and you withdraw $100 after 6 months. What would your ending balance be 20 years after the initial $100 deposit was made? Must use excel to find solutionarrow_forwardYou have received a post - dated check of $10, 000 that is payable in 2 years for a project you completed in the Fall. Unfortunately, you need the money right now, so you visit your local loan shark, who is happy to cash - advance your check for the friendly discount rate of either 25% with annual compounding or 24% with monthly compounding. 1. How much would you get with the first option?2. How much would you get with the second option? 3. Which option should you choose?arrow_forwardYou plan to start saving now for a downpayment for a house in your RRSP. You deposit $750 every month. starting next month, for 7 years at an average interest rate of 6%/a compounded monthly. How much money will you have in your RRSP for your down payment in 7 years? Your Answer:arrow_forward
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