1. Find F on year 6 for the cash flow diagram shown below ifier=0.06?
2. Joe Desperato approaches the Loan Friendly Shark Agency for $ 1,000 which he wishes to repay in 24 monthly
installments. The agency advertises interest at 1.5% per month. They proceed to calculate the size of his payment in
the following manner:
Interest= (1030)(24)(0.015) =
Total owed = 1030 + 371 =
Payments = 1401/24 =
What effective interest rate is Joe paying?
3. A man wishes to set aside some money for his son's college expenses and a graduation present. $ 8,000/yr would
drawn from the fund on the son's 18th, 19th, 20th birthday and $ 15,000 will be drawn on his 21th birthday. How
many dollars per year should the man deposit to the fund? The man is going to make the first deposit on his son's 5th
birthday and the last on his 15th birthday. The deposits would be for equal amounts and the money in the fund
compounds 5 % per year.
It is expected that a pump will incur operating cost of $ 2,000 for the first year and that these costs will increase
400 each year thereafter for the 20 year life of the pump. If the money is worth 15 % per year to the firm, what is the
equivalent annual worth of the operating costs?
5. Your credit card company has a special. They will lend you $10,000 from your credit card at interest rate is 0%
for a period of 15 months. The upfront fee is 4% of the borrowed amount which is added to your loan balance. The
minimum payment of $100 is expected monthly. What is the monthly effective interest rate?
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