You wish to borrow $1,000 for 8 years to start a business. You approach different lenders...

You wish to borrow $1,000 for 8 years to start a business. You approach different lenders who have the following offers. Which is the best lender to borrow from? All percentage rates are rounded to 6 decimal places.

Select one:

a. 9.645476% pa APR compounding quarterly where there are exactly 4 quarters per year.

b. 9.539758% pa APR compounding weekly where there are exactly 52 weeks per year.

c. 2.411369% as an effective quarterly rate where there are exactly 4 quarters per year.

d. 4.239326% as an effective semi-annual rate where there are exactly 2 semi-annual periods per year.

e. I'll lend you the $1,000 now if you pay me a single payment of $2,143.59 in 8 years, with no other payments in between.

Expert Solution

We calculate Effective annual rate (EAR) for each option to find out the lowest EAR.

Formula used:

Since EAR is lowest for option d. Option d is best lender to borrow from.

jeff jeffy answered 1 year ago

You wish to borrow $1,000 for 6 years to start a business. You approach different lenders...

You wish to borrow $1,000 for 6 years to start a business. You approach different lenders who have the following offers. Which is the best lender to borrow from? All percentage rates are rounded to 6 decimal places. Select one: a. 11.494938% pa APR compounding quarterly where there are exactly 4 quarters per year. b. 11.660105% pa APR compounding semi-annually where there are exactly 2 semi-annual periods per year. c. 2.873734% as an effective quarterly rate where there are exactly...

You want to borrow $300,000 to start a business. The loan initial balance is increased by...

You want to borrow $300,000 to start a business. The loan initial balance is increased by 2% of the loans face value(for loans origination fees, mortgage insurance, credit checks, title searches etc) Your annual payments are calculated using an initial balance of $306,00 an interest rate of 9% and a 20 year term. The bank requires you to refinance the loan in 5years by paying it off with a balloon payment. what interest rate are you paying?

Financial Management FATIMA wants to borrow $50,000 for a period of 6 years. The lenders offers...

Financial Management FATIMA wants to borrow $50,000 for a period of 6 years. The lenders offers her a choice of three payment structures: 1) Pay all of the interest (10 % per year) and principal in one lump sum at the end of 6 years; 2) Pay interest at the rate of 10 % per year for 5 years and then a final payment of interest and principal at the end of the 6th year; 3) Pay 6 equal payments...

You wish to buy a car in 2.5 years and would like to start saving now...

You wish to buy a car in 2.5 years and would like to start saving now for the down payment. Figure a 15 % down payment. Target price will be $65000. You currently have the ability to earn an after tax rate of 9.5% on investments. When you purchase the car you plan to finance it at 2.9% for 4 years. How much will you be financing when the time comes? How do you find that amount? What calculation will...

A person planned to start a business venture in Muscat and decided to borrow a loan...

A person planned to start a business venture in Muscat and decided to borrow a loan of OMR 52000 from Bank Muscat at an interest rate of 18 % per annum. Determine the following a) Simple interest and total amount due after 12 years if no intermediate payments are made and interest is compounded annually. b) Compound interest and total amount due after 9years if no intermediate payments are made and interest is compounded annually. c) Compound interest after 9...

You wish to purchase a 15-year deferred annuity (payments start now) that will last 20 years...

You wish to purchase a 15-year deferred annuity (payments start now) that will last 20 years and generate $3000 per month for those 20 years while growing in value at 3% during the 20-year payout period. Assuming the discount rate for all cash flows is 7% What is the price you should pay for this 15-year deferred, 3% growing 20-year annuity? in creating your answer, place a spinner on all key rates (growth and discount)

Suppose that you wish to borrow $325,000 today to finance the purchase of an asset and...

Suppose that you wish to borrow $325,000 today to finance the purchase of an asset and that you will repay me with equal quarterly payments over 15 years. a) If the APR is 4.426%, how much will you pay me each quarter? b) Amortize the first 2 payments. Make a table, and show the calculation of each cell in the table. c) Suppose that you plan to pay off the loan immediately after payment 35. What is the remaining principal?...

Lori wants to give her daughter $25,000 in 8 years to start her own business. Lori...

Lori wants to give her daughter $25,000 in 8 years to start her own business. Lori has already saved $5,000 already for this purpose. How much should Lori invest annually, at the beginning of each year, at an annual interest rate of 7%, compounded annually, to have $25,000 in 8 years?

You borrow $100,000 and make annual payments for 5 years. The interest rate is 8%. How...

You borrow $100,000 and make annual payments for 5 years. The interest rate is 8%. How much interest do you pay in year 2? PLEASE EXPLAIN STEP BY STEP HOW YOU SOLVE WITH ONLY YOUR FINANCIAL CALCULATOR

You plan to borrow $15,000 for 3 years. The interest rate is 8% compounded semi-annually. The...

You plan to borrow $15,000 for 3 years. The interest rate is 8% compounded semi-annually. The terms require you to amortize the loan with equal payments made every period. a) Calculate the amount of payment you would be paying every period? b) Set-up an amortization schedule

Question