1. Find the EAR in each of the following cases (Use 365 days a year. Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.):
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Stated Rate (APR)
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Number of Times Compounded
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Effective Rate (EAR)
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8.7
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%
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|
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Quarterly
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|
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%
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|
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17.7
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|
|
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Monthly
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|
|
|
|
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13.7
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|
|
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Daily
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|
|
|
|
|
10.7
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|
|
|
Infinite
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|
|
|
2. Big Dom's Pawn Shop charges an interest rate of 26.7 percent per month on loans to its customers. Like all lenders, Big Dom must report an APR to consumers.
What rate should the shop report? (Do not round intermediate calcualtions. Enter your answer as a percent rounded to 1 decimal place, e.g., 32.1.)
What is the effective annual rate? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)
3. One of your customers is delinquent on his accounts payable balance. You've mutually agreed to a repayment schedule of $750 per month. You will charge 1.9 percent per month interest on the overdue balance.
If the current balance is $18,000, how long will it take for the account to be paid off? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)
4. You want to be a millionaire when you retire in 40 years.
How much do you have to save each month if you can earn an annual return of 12 percent? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)
How much do you have to save each month if you wait 10 years before you begin your deposits? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)
How much do you have to save each month if you wait 20 years before you begin your deposits? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)