1. Fast Eddie's Used Cars will sell you a 2010 Mazda MR2 for $9,000 with no money down. You agree to make monthly payments for 3 years, starting one month after the sale. The interest rate on the loan is 6% APR. What is the effective annual rate on this loan?
2. GE is issuing a security called “preferred stock”. It will pay the holder a constant dividend of $1.50 every year forever. If the required return rate is 5% APR. What should be the price of this preferred stock?
3. You need $3,000 to buy a new set of tires for your car. If you have $1,200 to invest at 6% APR compounded semi-annually, how many years will you have to wait to have enough money for the new set?