Question

Guzman just borrowed $79,000 to buy a filtrstion system. The terms of the loan require him...

Guzman just borrowed $79,000 to buy a filtrstion system. The terms of the loan require him to make equal regular quarterly payments for 8 years plus an extra payment of $ 5,500 in 8 years. His first regular quarterly payment is due in 3 months. If guzmans regular quarterly payment is &3,656.12 , then what is the EAR of his loan.

a 11.16% ( plus or minus .03 percentage points)
b 13.01% ( plus or minus .03 percentage point
c 11.64 % ( plus or minus .03 percentage point
d 10.72 % ( plus or minus .03 percentage point
e none

Homework Answers

Answer #1
= C*[1-(1+i)^-n]/i] +final amount/(1+r)^32
Where,
C= Cash Flow per period
i = interest rate per period
n=number of period c=8*4 =32
79000= $3656.12[ 1-(1+r)^-32 /r] +5500/(1+r)^32
79000/3656.12 =[ 1-(1+r)^-32 /r] +5500/(1+r)^32
2.16076 =[ 1-(1+r)^-32 /r] +5500/(1+r)^32
r = 2.79%
Effective Annual Rate = (1+0.0279)^ 4 -1
=11.64%
Correct Answer =c 11.64 % ( plus or minus .03 percentage point
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
Andrew just borrowed $60000 to buy a new carrot harvester. The terms of the loan require...
Andrew just borrowed $60000 to buy a new carrot harvester. The terms of the loan require him to make equal monthly payments for 10 years. His first payment is due in one month. If Andrew must pay $1000 per month, then what is the EAR of his loan?
Andrew just borrowed $60000 to buy a new carrot harvester. The terms of the loan require...
Andrew just borrowed $60000 to buy a new carrot harvester. The terms of the loan require him to make equal monthly payments for 10 years. His first payment is due in one month. If Andrew must pay $1000 per month, then what is the EAR of his loan?
1) Celeste just borrowed 30,000 dollars. She plans to repay this loan by making equal quarterly...
1) Celeste just borrowed 30,000 dollars. She plans to repay this loan by making equal quarterly payments of 2,458.16 dollars for 15 quarters. If she makes her first quarterly payment later today, then what is the quarterly interest rate on the loan? Answer as a rate in decimal format so that 12.34% would be entered as .1234 and 0.98% would be entered as .0098. 2) A trampoline park is worth 255,011 dollars. It is expected to produce equal monthly cash...
1. John invested $20,000 fifteen years ago with an insurance company that has paid him 8...
1. John invested $20,000 fifteen years ago with an insurance company that has paid him 8 percent (APR), compounded quarterly (every 3 months). How much interest did John earn over the 15 years? a. $2,416.08 b. $45,620.62 c. $24,000.00 d. $28,318.95 e. $65,620.62 2. You are running short of cash and really need to pay your tuition. A friend suggests that you check out the local title pawn shop. At the shop they offer to loan you $5,000 if you...
In your answers, you should properly show your work by writing down your entries into the...
In your answers, you should properly show your work by writing down your entries into the calculator. For instance, if you use the TVM worksheet of your financial calculator to compute how long it takes to double your account balance given 5% annual interest rate, you should write down your entries as: I/Y=5, PV=-1, PMT=0, FV=2, CPT N=? --- the question mark here stands for your answer to the question. Question 6 – PV, Ordinary Annuity, Compounding [2 points]: Find...
6.   If the general level of interest rates goes down and I am holding a bond with...
6.   If the general level of interest rates goes down and I am holding a bond with a fixed coupon rate, I would expect the value of my bond to a.stay the same b.double c.increase d.decrease e.not enough information to tell 7.  The Rule of 72’s a.Is about doubling the present value to get the future value. b.Says that 72 divided by the payment gives you the number of years to double. c.Says that the rate divided by 72 gives you the...
Please read the article and answear about questions. Determining the Value of the Business After you...
Please read the article and answear about questions. Determining the Value of the Business After you have completed a thorough and exacting investigation, you need to analyze all the infor- mation you have gathered. This is the time to consult with your business, financial, and legal advis- ers to arrive at an estimate of the value of the business. Outside advisers are impartial and are more likely to see the bad things about the business than are you. You should...
Please answer the following Case analysis questions 1-How is New Balance performing compared to its primary...
Please answer the following Case analysis questions 1-How is New Balance performing compared to its primary rivals? How will the acquisition of Reebok by Adidas impact the structure of the athletic shoe industry? Is this likely to be favorable or unfavorable for New Balance? 2- What issues does New Balance management need to address? 3-What recommendations would you make to New Balance Management? What does New Balance need to do to continue to be successful? Should management continue to invest...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT