   # Annual Percentage Rate and Decimal Places

Satisfactory Essays
Time Value of Money 1) A store offers two payment plans. Under the installment plan, you pay 20% down and 20% of the purchase price in each of the next 4 years. If you pay the entire bill immediately, you can take a 5% discount from the purchase price. | a. | Calculate the present value of the payments, if you can borrow or lend funds at a 7% interest rate. Assume the product sells for \$100. (Do not round intermediate calculations. Round your answer to 2 decimal places.) | Present value | \$ | b. | Calculate the payment net of discount. | Payment net of discount | \$ | c. | Which is a better deal? | | | | | Pay the entire bill immediately | | Installment plan | |

2) Home loans typically involve “points,” which are fees charged by the lender. Each point charged means that the borrower must pay 1% of the loan amount as a fee. For example, if the loan is for \$170,000 and 4 points are charged, the loan repayment schedule is calculated on a \$170,000 loan but the net amount the borrower receives is only \$163,200. What is the effective annual interest rate charged on such a loan assuming loan repayment occurs over 156 months? Assume the interest rate is .75% per month. (Do not round intermediate calculations. Round your answer to 2 decimal places.) | Effective annual interest rate | % |
3) Suppose you take out a \$1,000, 4-year loan using add-on interest with a quoted interest rate of 23.25% per year. |

a. | What will your monthly payments be? (Total payments are \$1,000 + \$1,000 × .2325 × 4 = \$1,930.) (Do not round intermediate calculations. Round your answer to 2 decimal places.) |

Monthly payments | \$ |

b. | What are the true APR and effective annual rate on this loan? (Do not round intermediate calculations. Round your answers to 3 decimal places.) |

| APR | % | Effective annual rate | % | | |

4) In a discount interest loan, you pay the interest payment up front.

## You May Also Find These Documents Helpful

• Good Essays

Which one of the following statements is correct concerning annual percentages rates (APRs)? Answer: The APR is equal to the monthly interest rate multiplied by 12 Give an interest rate of zero percent, the future value of a lump sum invested today will always: Answer: remain constant Answer: II and IV A firm created as a separate and distinct legal entity that may be owned by one or more individuals or entities is called a: corporation The capital structure of a firm refers to the…

• 792 Words
• 4 Pages
Good Essays
• Satisfactory Essays

graphs. Do not use staples, paper clips, highlighters, glue or correction fluid. Answer all the questions. Write your answers on the separate Answer Booklet/Paper provided. Give non-exact numerical answers correct to 3 significant figures, or 1 decimal place in the case of angles in degrees, unless a different level of accuracy is specified in the question. At the end of the examination, fasten all your work securely together. The number of marks is given in brackets [ ] at the end of each question…

• 1304 Words
• 6 Pages
Satisfactory Essays
• Satisfactory Essays

Decimals decimals The decimal numeral system (also called base ten or occasionally denary) has ten as its base.  It is the numerical base most widely used by modern civilizations.  Decimals also refer to decimal fractions. To understand decimal numbers you must first know about Place Value. When we write numbers, the position (or "place") of each number is important. History of Decimals The Arabic numeral system is considered one of the most significant developments in mathematics, and…

• 377 Words
• 3 Pages
Satisfactory Essays
• Satisfactory Essays

SCI 1400 – F2012 Assignment # 1 Name: SI Units, Train Track & Conversions Page 1 of 14 1. When discussing measurement systems, the abbreviation “SI” stands for _____________________________________ 2. The predecessor of the SI system of weights and measures is the ____________ system. 3. Name two other measurement systems still in use today. ______________________ _________________________ 4. The SI system officially came into being in the year ________________. 5. The metric…

• 1817 Words
• 8 Pages
Satisfactory Essays
• Good Essays

Accounting rate of return Accounting rate of return (also known as simple rate of return) is the ratio of estimated accounting profit of a project to the average investment made in the project. ARR is used in investment appraisal. Formula Accounting Rate of Return is calculated using the following formula: ARR = Average Accounting Profit Average Investment Average accounting profit is the arithmetic mean of accounting income expected to be earned during each year of the project's life time…

• 472 Words
• 2 Pages
Good Essays
• Good Essays

provided. Problem 1 . Regency Integrated Chips (RIC), a large Nashville-based technology company is evaluating a new project to manufacture a new chip. a. b. The project’s estimated economic life is 5 years. RIC’s marketing vice-president believes that annual sales would be 30,000 units if the units were priced at \$3,000 each. RIC expects no growth in unit sales, and it believes that the unit price will rise by 2 percent each year. c. The engineering department has reported that the project will require…

• 703 Words
• 3 Pages
Good Essays
• Good Essays

1) A \$100 deposit today that earns an annual interest rate of 10% is worth how much at the end of two years? Assume all interest received at the end of the first year is reinvested the second year. 2) An investment of \$100 today is worth \$116.64 at the end of two years if it earns an annual interest rate of 8%. How much interest is earned in the first year and how much in the second year of this investment? 3) Which of the following investments has a larger future value? A \$100 investment…

• 550 Words
• 3 Pages
Good Essays
• Good Essays

a difference between the interest rates on AAA corporate bonds and U.S. Treasury notes? 3. Your father is about to retire. His firm has given him the option of retiring with a lump sum of \$50,000 in ten years or an annuity of \$8,000 for ten years. Which is worth more now, if the discount rate is (a) 6% (b) 19%? 4. Suppose you open a saving account with \$1,800 earned in a summer job. The account's stated interest rate is 11%. Calculate effective annual rate (EAR) if interest is paid (a) semiannually…

• 670 Words
• 3 Pages
Good Essays
• Satisfactory Essays

examination room.  Bags must be left at the front of the room. 1 Part A (15 marks) Select the one best answer choice for each question. Question 1: A stock just paid its annual dividend of \$9. The share price is \$60. The required return of the stock is 10% pa as an effective annual rate. What is the implied growth rate of the dividend? (a) -0.8565 (b) -0.0500 (c) -0.0435 (d) 0.0000 (e) 0.1500 Question 2: A stock is expected to pay a dividend of \$15 in one year (t=1), then \$25 for 9 years…

• 2032 Words
• 8 Pages
Satisfactory Essays
• Satisfactory Essays

Binary Number System: Conversion of Decimal number to Binary number: Set up the problem. For this example, let's convert the decimal number 15610 to binary. Write the decimal number as the dividend inside an upside-down "long division" symbol. Write the base of the destination system (in our case, "2" for binary) as the divisor outside the curve of the division symbol. Write the integer answer (quotient) under the long division symbol, and write the remainder (0 or 1) to the right of the…

• 452 Words
• 2 Pages
Satisfactory Essays