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 6 – PV, Ordinary Annuity, Compounding [2 points]:
Find the present value of the following ordinary annuities:
a) PV of $300 each six months for five years at a simple rate
of 12 percent, compounded semiannually
b) PV of $150 each three months for five years at a simple
rate of 12 percent, compounded quarterly
Question 7 – TVM, Compounding, Finding PMT [2 points]: Sue
wants to buy a car that costs $20,000. She has arranged to borrow
the total purchase price of the car from her credit union at a
simple interest rate equal to 12 percent. The loan requires
quarterly payments for a period of five years. If the first payment
is due in three months (one quarter) after purchasing the car, what
will be the amount of Sue’s quarterly payments on the loan?
Question 8 – TVM, Finding N [2 points]: While Steve Bouchard
was a student at the University of Florida, he borrowed $20,000 in
student loans at an annual interest rate of 6.4 percent. If Steve
repays $1,800 per year, how long, to the nearest year, will it take
him to repay the loan?
Question 9 – rEAR versus rSIMPLE [2 points]: The First City
Bank pays 6.6 percent interest, compounded annually, on time
deposits. The Second City Bank pays 6.5 percent interest,
compounded monthly. Based on effective interest rates, in which
bank would you prefer to deposit your money?
Question 10 – rEAR versus rSIMPLE [2 points]: Krystal Magee
invested $150,000 18 months ago. Currently, the investment is worth
$179,422. Krystal knows the investment has paid interest every
month, but she doesn’t know what the yield on her investment is.
Help Krystal. Compute both the annual percentage rate (APR),
rSIMPLE, and the effective annual rate (EAR), rEAR.