Question
In: Finance
You were offered the opportunity to purchase either a simple interest note or a simple discount...
You were offered the opportunity to purchase either a simple interest note or a simple discount note with the following terms: $37,172 at 10% for 6 months.
a. Calculate the effective interest rate. (Do not round intermediate calculations. Round your final answer to the nearest tenth percent.)
Effective interest rate %
b. Based on the effective interest rate, which would you choose?
| simple interest note | |
| simple discount note |
Solutions
jeff jeffy answered 1 year agoRelated Solutions
You were offered the opportunity to purchase either a simple interest note or a simple discount...
You were offered the opportunity to purchase either a simple
interest note or a simple discount note with the following terms:
$38,485 at 7% for 36 months.
a. Calculate the effective interest rate
You are offered an investment opportunity which pays an annual interest rate of 2.6% for the...
You are offered an investment opportunity which pays an annual
interest rate of 2.6% for the next five years. Your initial deposit
is $3,000. Assumes interest is compounded quarterly. How much will
you have at the end of five years?
a.
$3,415.05
b.
$3,807.21
c.
$3,410.81
d.
$3,502.32
e.
$3,098.78
1. A. You purchase a 2-year discount Treasury note for $961.17 with a Face Value of...
1. A. You purchase a 2-year discount Treasury note for $961.17
with a Face Value of $1,000, calculate the yield to maturity (YtM)
on this bond? (2 points—note, this is a PV of lump sum formula
solving for i)
B. Investors are getting worried about the economic recovery and
there is a “flight to quality,” increasing the demand for
Treasuries. Given the increased demand, the price of the 2-year
note has increased to $964.00. Calculate the new YtM (2
points—note,...
Suppose you have the opportunity to purchase either of two drugstores. One is the only drugstore...
Suppose you have the opportunity to purchase either of two
drugstores. One is the only drugstore in a small town and the
building inspector there has guaranteed that no additional
drugstores will be permitted. The second is a drugstore in a large
city where there are hundreds of competitors. Which would you buy?
Why?
Suppose you were offered the opportunity to buy convertible preferred shares or participating preferred shares of...
Suppose you were offered the opportunity to buy convertible
preferred shares or participating preferred shares of the same
company for the same price. Which would you take? Explain why.
(b) You have been offered the opportunity to purchase a start up company building electric cars...
(b) You have been offered the opportunity to purchase a start up
company building electric cars for the Australian market called
Green Motors P/L. Your initial investment is $22,000,000. The term
of the project is 5 years. The project has an expected rate of
return of 10% pa. All expected cash flows for the project are below
and you have an expected rate of return of 10% pa.
End of year
Cash flow ($mil)
1
1.8
2
3.0
3
6.5...
NOTE FOR QUESTION 9: In a discount interest loan, the interest is deducted from the amount...
NOTE FOR QUESTION 9: In a discount interest loan, the interest
is deducted from the amount the borrower receives at the beginning
of the loan. For example, if a bank makes a one-year loan of
$10,000 at a simple interest rate of 5%, the borrower essentially
borrows $9,500 at the beginning of the year and repays it with no
interest at the end of the year.
9.A bank offers your firm a discount interest loan at 8.25
percent for up...
An insurance agent called your folks and offered them an opportunity to purchase an annuity for...
An insurance agent called your folks and offered them
an opportunity to purchase an annuity for $8,531.03 that will pay
them $1,000 per year for 20 years. What would they be making on
there investment of $8,531. What tate of return would they
earn?
The annual rate of return your folks would earn on their investment
is __%.
(round to two decimal places)
Some overseas borrowers are being offered the opportunity to obtain a second mortgage and purchase an...
Some overseas borrowers are being offered the opportunity to
obtain a second mortgage and purchase an Australian property,
without necessarily having a deposit. For example, the second-
largest insurance company in China offers loans to Chinese
investors for Australian residential property. The Chinese
borrowers use the second mortgage as a deposit for an off the plan
apartment, with the expectation that a senior loan will later be
obtained from an Australian bank to pay the final 70% when the
apartment...
Some overseas borrowers are being offered the opportunity to obtain a second mortgage and purchase an...
Some overseas borrowers are being offered the opportunity to
obtain a second mortgage and purchase an Australian property,
without necessarily having a deposit. For example, the second-
largest insurance company in China offers loans to Chinese
investors for Australian residential property. The Chinese
borrowers use the second mortgage as a deposit for an off the plan
apartment, with the expectation that a senior loan will later be
obtained from an Australian bank to pay the final 70% when the
apartment...
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