Exam 5: Interest Rates

Emma runs a small factory that needs a vacuum oven for brazing small fittings.She can purchase the model she needs for $180,000 up front,or she can lease it for five years for $4200 per month.She can borrow at 7% APR,compounded monthly.Assuming that the oven will be used for five years,should she purchase the oven or should she lease it?

In which of the following situations would the central bank in a certain country be most likely to lower interest rates?

Corey buys 10 Tufflift 4-post,4.5-ton car hoists for his parking garage at a total cost of $410,000.He finances this with a five-year loan at 6.2% APR with monthly payments.After he has made the first 20 payments,how much is the outstanding principal balance on his loan?

A bank offers an account with an APR of 6% and an EAR of 6.09%.How does the bank compound interest for this account?

A bank offers a loan that will requires you to pay 6% interest compounded monthly.Which of the following is closest to the EAR charged by the bank?

If the current inflation rate is 5%,then the nominal rate necessary for you to earn an 8% real interest rate on your investment is closest to:

A truck costing $112,000 is paid off in monthly installments over four years with 8% APR.After three years the owner wishes to sell the truck.What is the closest amount from the following list that he needs to pay on his loan before he can sell the truck?

Quality adjustments to changes in the CPI most often result in reductions to the inflation rate calculated from it.

You decide to take out a car loan for $14,995 at 3% APR for 48 months.How much are your monthly payments?

Given a nominal interest rate of 7% and an inflation rate of 2.5%,what is the real interest rate?

Your bank account pays quarterly interest with an EAR of 7%.What amount of interest will you earn each quarter?

Howard is saving for a long holiday.He deposits a fixed amount every month in a bank account with an EAR of 7.5%.If this account pays interest every month then how much should he save from each monthly paycheck in order to have $10,000 in the account in two years' time?

What,typically,is used to calculate the opportunity cost of capital on a risk-free investment?

The monthly discount rate that you should use to evaluate the truck lease is closest to:

What is the present value (PV)of an investment that pays $10,000 every year for four years if the interest rate is 7% APR,compounded quarterly?

An investor buys a property for $640,000 with a 25-year mortgage and monthly payments at a quoted APR of 8%.After 18 months the investor resells the property for $712,000.How much cash will the investor have made from the sale,once the mortgage is paid off?

The amount of your original loan is closest to:

The effective annual rate on your firm's borrowings is closest to:

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

A house costs $138,000.It is to be paid off in exactly ten years,with monthly payments of $1675.What is the quoted APR of this mortgage?