1. One of your customers is delinquent on his accounts payable balance. The two of you have agreed to a repayment schedule of $500 at the end of each month. You will charge 1.3 percent per month interest on the overdue account.
a) The periodic rate is 1.3%, but what is the Annual Percentage Rate?
b) What is the Effective Annual Rate?
c) If the current balance is $18,000, how many months will it take to pay off this account?
2. Your goal is to accumulate $15,000 in savings. You can earn 9% APR, compounded quarterly.
a) If you deposit $1,600 at the end of each quarter into savings, how long will it take to reach your goal?
b) If you deposit $1,600 at the beginning of each quarter into savings, how long will it take to reach your goal?
3. You owe $10,000 in student loans. The annual rate is 6.8%, compounded monthly. To repay this loan, you are required to make payments at the end of each month for 60 months. What is the monthly payment?
4. An account earns 10% annually, compounded quarterly, how much will you have in 40 years if
a) you deposit $1,200 at the end of each quarter into your retirement account.
b) you deposit of $1,200 at the beginning of each quarter into your retirement account.