Finance 3/2

At the end of 5 days, you repay your $1000 loan plus $50 in interest. What is EAR

((1050/1000)^(365-5))-1

12% compounded semiannually

(1+(.12/2)^2-1)

you agree to repay 1200 in 2 weeks for a 1000 payday loan. What is your EAR assuming there are 52 weeks in that year.

(12000/1000)^26-1 11347.55%

If IR is 10% a week what is EAR?

1.10^52-1=14140.29%

Assume 12% annual interest is compounded semiannually on a 500 investment. What will it be worth after 1 year?

500*(1.06)^2

you borrow 100 and agree to pay back your payday loan in 2 weeks. the IR is 10 percent for the 2 week period. What is APR?

52/2*.10 = 2.6 2.6*100=260%

The effective annual rate (EAR) takes into account the _______ of interest that occurs within a year.

Compounding (1+(r/m))^m-1

asuume $100 investments earns a stated interest rate of 10%, compounded monthly. What will value be after 1 year?

Monthly(IR) .1/12=.008333 FV=100*(1+.008333)^12=110.47

Annual percentage rate is the annual interest rate without consideration of ___________

compounding

More frequent compounding leads to __________

higher EARs and EAYs

The IR (r) used in the general compounding formula is the _______________ IR.

quoted

EAR is meaningful for comparisons ______________

without a compounding interval