Question

6. What would your payment be on a 10-year, $150,000 loan at 10% interest compounded semiannually assuming the payments are made annually? A) $19,716.67 B) $20,743.77 C) $24,411.81 D) $24,674.60 E) $25,366.63

9. Given the following cash flows, what is the implicit discount rate if the present value is $2,020?

Year    1    2    3

Cash Flow $500 $750 $1000

A) 4.5%

B) 4.8%

C) 5.0%

D) 5.4%

E) 5.9%

Answer 1

Q6:

Interest compounded semi annualy ; Hence effective interest rate= (1+10%)^2 -1 =10.25%

Annual payments is calculated in excel by the pmt function ( =pmt(rate, length, principal) = pmt(10.25%,10,150000))

Hence annual payments= 24674.6

Q7:

From the data given;

2020 = 500/(1+r) + 750/(1+r)^2 + 1000/(1+r)^3 ;

the equation can be solved using irr function in excel considering 2020 as intial cash outflow;

ie:

Year	0	1	2	3
CF	-2020	500	750	1000
IRR	5%

Hence discount rate=5%