Your credit card company is advertising a 17% APR (or \"stated annual rate\"). W

Question

Your credit card company is advertising a 17% APR (or "stated annual rate"). What is th anual rate you are actually paying if interest is compounded monthly (or "effective annual rate")? A. 12.117% B. 12.932% . 14.167% D. 18.389% E. 20.745% 6. An investment will pay $32,000 per year forever. If the relevant rate is 10% pa. and today. compounded monthly, the investment is worth $ A. 305,597.01 B. 317,604.75 C. 384,000.00 D. 320,000.00 E. 3,840,000.00 Which of the following investment options is most valuable? A. receiving $10,000 today B. receiving $1,000 per year for 10 years with the first payment made today C. receiving $2,000 per year for five years beginning next year D. receiving $5,000 today and $5,000 next year E. Without an interest rate there is not enough information to tell. 7. 8. Kerri James is considering the purchase of a car, which will cost her $24,600. She will borrow the entire purchase price and make monthly payments over the next six years. The first payment is duc next month and the interest rate is 3.00% pa. She will owe $ on the car immediately following the 16th payment. A. 17,397.75 B. 18,858.19 C. 19,508.99 D. 20,757.33 E. 21,348.72

Explanation / Answer

1.
=(1+17%/12)^12-1
Option D
2.
=32000/((1+10%/12)^12-1)
Option A
3.
All Options A to D have the total sum of cash flows as 10000
It would be better to receive higher cash flows in the beginning itself
Hence, Option A
4.
=FV(3%/12,16,PMT(3%/12,72,24600),24600)
Option C

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