# Converting Before Using the Tables Essay

1 ) A shop offers two payment programs. Under the installment program. you pay 20 % down and 20 % of the purchase monetary value in each of the following 4 old ages. If you pay the full measure instantly. you can take a 5 % price reduction from the purchase monetary value. | a. | Calculate the present value of the payments. if you can borrow or impart financess at a 7 % involvement rate. Assume the merchandise sells for \$ 100. ( Do non round intermediate computations. Round your reply to 2 denary topographic points. ) | Present value| \$ |

B. | Calculate the payment cyberspace of price reduction. |
Payment cyberspace of discount| \$ |
c. | Which is a better trade? |
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| | Pay the full measure immediately|
| Installment plan|
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2 ) Home loans typically involve “points. ” which are fees charged by the loaner. Each point charged means that the borrower must pay 1 % of the loan sum as a fee. For illustration. if the loan is for \$ 170. 000 and 4 points are charged. the loan refund agenda is calculated on a \$ 170. 000 loan but the net sum the borrower receives is merely \$ 163. 200. What is the effectual one-year involvement rate charged on such a loan presuming loan refund occurs over 156 months? Assume the involvement rate is. 75 % per month. ( Do non round intermediate computations. Round your reply to 2 denary topographic points. ) | Effective one-year involvement rate| % |

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3 ) Suppose you take out a \$ 1. 000. 4-year loan utilizing add-on involvement with a quoted involvement rate of 23. 25 % per twelvemonth. |

a. | What will your monthly payments be? ( Entire payments are \$ 1. 000 + \$ 1. 000 ? . 2325 ? 4 = \$ 1. 930. ) ( Do non round intermediate computations. Round your reply to 2 denary topographic points. ) |

Monthly payments| \$ |

B. | What are the true APR and effectual one-year rate on this loan? ( Do non round intermediate computations. Round your replies to 3 denary topographic points. ) |

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APR| % |
Effective one-year rate| % |
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4 ) In a price reduction involvement loan. you pay the involvement payment up front. For illustration. if a 1-year loan is stated as \$ 28. 000 and the involvement rate is 22. 25 % . the borrower “pays” 0. 2225 ? \$ 28. 000 = \$ 6. 230 instantly. thereby having net financess of \$ 21. 770 and refunding \$ 28. 000 in a twelvemonth. What is the effectual one-year rate on a 1-year loan with an involvement rate quoted on a price reduction footing of 22. 25 % ? ( Do non round intermediate computations. Round your reply to 2 denary topographic points. ) |

Effective one-year rate| % |

5 )
You believe you will necessitate to hold saved \$ 520. 000 by the clip you retire in 40 old ages in order to populate comfortably. If the involvement rate is 5 % per twelvemonth. how much must you salvage each twelvemonth to run into your retirement end? ( Do non round intermediate computations. Round your reply to 2 denary topographic points. ) |

Annual savings| \$ |

6 )

Your confer withing house will bring forth hard currency flows of \$ 110. 000 this twelvemonth. and you expect hard currency flow to maintain gait with any addition in the general degree of monetary values. The involvement rate presently is 6. 2 % . and you anticipate rising prices of approximately 2. 2 % . |

a. | What is the present value of your firm’s hard currency flows for old ages 1 through 6? ( Do non round intermediate computations. Round your reply to 2 denary topographic points. ) |

Present value| \$ |

B. | How would your reply to ( a ) alteration if you anticipated no growing in hard currency flow? ( Do non round intermediate computations. Round your reply to 2 denary topographic points. ) |

Present value| \$ |

7 )
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Good intelligence: You will about surely be a millionaire by the clip you retire in 40 old ages. Bad intelligence: The rising prices rate over your life-time will average approximately 2. 6 % . |

a. | What will be the existent value of \$ 1 million by the clip you retire in footings of today’s dollars? ( Do non round intermediate computations. Round your reply to the nearest dollar sum. ) |

Real value| \$ |

B. | What existent rente ( in today’s dollars ) will \$ 1 million support if the existent involvement rate at retirement is 2. 4 % and the rente must last for 10 old ages? ( Do non round intermediate computations. Round your reply to the nearest dollar sum. ) |

Real annuity| \$ |

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8 )
You believe you will pass \$ 40. 000 a twelvemonth for 20 old ages one time you retire in 40 old ages. If the involvement rate is 6 % per twelvemonth. how much must you salvage each twelvemonth until retirement to run into your retirement end? ( Do non round intermediate computations. Round your reply to 2 denary topographic points. ) |

Annual savings| \$ |