3-16 We know that a certain piece of equipment will cost $275,000 in 6 years. How much must be deposited today using 8% interest to pay for it?
3-22 Alvin's Uncle Arnold gave him $16,000 from selling the old family farm. Alvin wants to start college and have $12,000 available to buy a used car when he graduates in 4 years. Alvin earns 2% in his savings account. How much can he spend on a motorcycle of money could be borrowed for the same period at an interest rate of 6% per year, how much could be saved in interest charges?
3-43 A bank advertises it pays 4% annual interest, compounded daily, on savings accounts, provided the money is left in the account for 5 years. What is the effective annual interest rate?
3-44 At the Central Furniture Company, customers who buy on credit pay an effective annual interest rate of 16.1%, based on monthly compounding.
(a) What is the nominal annual interest rate that they pay?
(b) Research the effective annual interest rates charged on a credit card that you or a friend has. How does the rate change if there is a late or skipped payment? What drives these rates? Are the rates ethical? Why or why not?
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