Question

In: Finance

Angela loans Kathy $8,000. Kathy repays the loan by paying $5,000 at the end of one and a half years and $5,000 at the end of three years.

Angela loans Kathy $8,000. Kathy repays the loan by paying $5,000 at the end of one and a half years and $5,000 at the end of three years. The money received at t =  is immediately reinvested at an annual effective interest rate of 5%. Find Kathy's annual effective rate of interest and Angela's annual yield. (Round your answers to two decimal places.)

Kathy's annual effective rate of interest = ________ %

Angela's annual yield = ___________%

Solutions

Expert Solution

1.
8000-5000/(1+r)^1.5-5000/(1+r)^3=0
=>r=10.565%

2.
=((5000*1.05^1.5+5000)/(8000))^(1/3)-1
=9.0681%


Related Solutions

Ian loans Yifan $600. Yifan repays the loan by paying $310 at the end of two...
Ian loans Yifan $600. Yifan repays the loan by paying $310 at the end of two and a half years and $325 at the end of four years. The money which Ian receives at the end of two and a half years is immediately reinvested at an annual effective interest rate of 4%. Find Ian’s annual effective rate of interest and Yifan’s annual yield. The answers are 2.16941% and 1.75280% respectively. Just need the work to show how to find...
If a loan shark offers to give you $5,000 today in return for$8,000 in three...
If a loan shark offers to give you $5,000 today in return for $8,000 in three weeks, what is the implied weekly compound interest rate?
A loan is to be repaid over 30 years, with month-end repayments of 8,000. If the...
A loan is to be repaid over 30 years, with month-end repayments of 8,000. If the interest rate is 3.8% p.a. compounded monthly. Calculate the interest paid for year 10. Correct your answer to the nearest cent without any units. (Do not use "$" or "," in your answer. e.g. 12345.67)
A loan is to be repaid over 30 years, with month-end repayments of 8,000. If the...
A loan is to be repaid over 30 years, with month-end repayments of 8,000. If the interest rate is 4.9% p.a. compounded monthly. Calculate the loan outstanding balance at the end of 10 years. Correct your answer to the nearest cent without any units. (Do not use "$" or "," in your answer. e.g. 12345.67)
Bob borrows 540,000 at annual effective interest rate 3%. She repays this loan by paying off...
Bob borrows 540,000 at annual effective interest rate 3%. She repays this loan by paying off only the interest due at the end of each year to the lender and depositing a level amount Q at the end of each year into a sinking fund account paying 6% APY. The goal is to accumulate the full balance of the loan amount in the sinking fund at the end of 10 years. a. Find the level sinking fund deposit. b. What...
11. Calculate the effective annual rate on each of the following loans: a. A $5,000 loan...
11. Calculate the effective annual rate on each of the following loans: a. A $5,000 loan for two years, 10 percent simple annual interest, with principal repayment at the end of the second year 5000(.10)(2) = $1,000 (1,000/2) = 500 500/5000 = 10% b. A $5,000 loan for two years, 10 percent add-on interest, paid in 24 equal monthly installments c. A $5,000 loan to be repaid at the end of two years, 10 percent discount rate
Roberto borrows $10,000 and repays the loan with three equal annual payments. The interest rate for...
Roberto borrows $10,000 and repays the loan with three equal annual payments. The interest rate for the first year of the loan is 4% compounded annually; for the second year of the loan the interest rate is 5% compounded annually; for the third year of the loan the interest rate is 6% compounded annually. a. Determine the size of the equal annual payments. b. Would interchanging the interest rates for first year and third year change the answer to part...
Sam buys a perpetuity paying $5,000 every three years, starting immediately. He deposits the payments into...
Sam buys a perpetuity paying $5,000 every three years, starting immediately. He deposits the payments into a savings account earning interest at an effective interest rate of 5%. Twelve years later, before receiving the fifth payment, Sam sells the perpetuity based on an effective annual interest rate of 5%. Using proceeds from the sale plus the money in the savings account, he purchases an annuity paying P at the end of every two years for twenty years at an annual...
A project has annual cash flows of $5,000 for the next 10 years and then $8,000...
A project has annual cash flows of $5,000 for the next 10 years and then $8,000 each year for the following 10 years. The IRR of this 20-year project is 10.58%. If the firm's WACC is 10%, what is the project's NPV? Round your answer to the nearest cent. Do not round your intermediate calculations.
A deposit of $5,000 earns interest at 4% compounded semi-annually. After three-and-a-half years, the interest rate...
A deposit of $5,000 earns interest at 4% compounded semi-annually. After three-and-a-half years, the interest rate is changed to 4.5% compounded quarterly. How much is the account worth after 7 years? Jan is saving for a new bike that will cost $800. She has $500, which she has invested at 7% compounded semi-annually. How many years will it be (approximately) until she has $800? How long will it take for money to double if it is compounded quarterly at 6%?
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT