Question 3: You wish to buy a $10,000 dining room set. The furniture store offer

Question

Question 3: You wish to buy a $10,000 dining room set. The furniture store offers you a 3-year loan with an 11 percent APR. What are the monthly payments? (Do not round intermediate calculations. Round your final answer to 2 decimal places.) Payment $ per month How would the payment differ if you paid interest only? (Do not round intermediate calculations. Round your final answer to 2 decimal places.) Payment $ per month What would the consequences of such a decision be? You would have repaid the loan completely. You would have paid $11786.04 at the end of the 36 months. You would owe $3300.12 at the end of the 36 months. You would owe $10,000 at the end of the 36 months

Question 4: What annual rate of return is implied on a $2,500 loan taken next year when $3,500 must be repaid in year 4? (Do not round intermediate calculations. Round your final answer to 2 decimal places.) Annual rate of return ______%

Explanation / Answer

Answer 3 a

Monthly payment => 10000* { (0.11 /12) / [1 - (1 / (1 + 0.11/12)36]}

=> 10000 * {0.0091666 / [ 1- (1 / 1.3888)

=> 10000 * 0.032743

=> $327.43

The monthly payments => $327.43

Answer 3b

if we paid only interest than paymnt would be => (10000*11%)/12 => $91.67

Answer 3c

The consequences would be that we would owe $10000 at the end of 36 nmonths too.

Answer 4

Fv => Pv * (1 +i )n

Fvv => Pv1* (1 +i )(4-1)

3500 => 2500 * (1 +i )(4-1)

(1 +i )(3) => 3500 / 2500

i => (1.40)(1/3) -1

Annual rate of return => 0.1187 or 11.87%

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