Exam 5: Interest Rates

Use the table for the question(s) below. Suppose you have the following Loans / Investments -If your income tax rate is 30%,then the after-tax return you receive on your money market fund is closest to:

Use the information for the question(s) below. Your firm needs to invest in a new delivery truck. The life expectancy of the delivery truck is five years. You can purchase a new delivery truck for an upfront cost of $200,000, or you can lease a truck from the manufacturer for five years for a monthly lease payment of $4,000 (paid at the end of each month). Your firm can borrow at 6% APR with quarterly compounding. -You are in the process of purchasing a new automobile that will cost you $25,000.The dealership is offering you either a $1,000 rebate (applied toward the purchase price)or 3.9% financing for 60 months (with payments made at the end of the month).You have been pre-approved for an auto loan through your local credit union at an interest rate of 7.5% for 60 months.Should you take the $1,000 rebate and finance through your credit union or forgo the rebate and finance through the dealership at the lower 3.9% APR?

Use the information for the question(s) below. Your firm needs to invest in a new delivery truck. The life expectancy of the delivery truck is five years. You can purchase a new delivery truck for an upfront cost of $200,000, or you can lease a truck from the manufacturer for five years for a monthly lease payment of $4,000 (paid at the end of each month). Your firm can borrow at 6% APR with quarterly compounding. -The monthly discount rate that you should use to evaluate the truck lease is closest to:

To calculate a loan payment,we first compute ________ from the quoted interest rate of the loan,and then equate the outstanding loan balance with ________ of the loan payments and solve for the loan payment.

Normally,a Canadian mortgage rate is quoted as ________.

The highest effective rate of return you could earn on any of these investments is closest to:

Use the table for the question(s) below. Suppose you have the following Loans / Investments -If your income tax rate is 30%,then the after-tax EAR for your home equity loan is closest to:

Canadian mortgages are quoted with APRs using ________ compounding even though payments are usually monthly.

The effective annual rate (EAR)for a loan with a stated APR of 8% compounded monthly is closest to:

Which of the following statements is false?

A mortgage is a loan where the borrower offers ________ as security for the lender.

The term structure of risk-free Canadian interest rates provides the yield curve that can be used to compute

Use the table for the question(s) below. Consider the following investment alternatives: -Which alternative offers you the highest effective rate of return?

An annual percentage rate (APR)could be compounded

Use the information for the question(s) below. You are in the process of purchasing a new automobile that will cost you $27,500. The dealership is offering you either a $2,500 rebate (applied toward the purchase price) or 1.9% financing for 48 months (with payments made at the end of the month). You have been pre-approved for an auto loan through your local credit union at an interest rate of 6.5% for 48 months. -If you forgo the $2,500 rebate and finance your new car through the dealership your monthly payments (with payments made at the end of the month)will be closest to:

Which of the following statements is false?

Which of the following statements is false?

The rate of growth of your purchasing power,after adjusting for inflation,is determined by ________.

The most common payment schedule calls for monthly payments; thus,before using the quoted APR,you must convert the quoted APR into ________ rate per month.

Assume that you presently have a monthly mortgage on a rental property with a stated interest rate of 7% APR.If your income tax rate is 20%,then the after tax EAR for your mortgage on a rental property is closest to: