What is the effective annual rate

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Q1. You are planning to buy a house in 9 years. You would like to be able to make a down payment of $19,000. The stated interest rate is 13% (APR). If interest is compounded semi-annually, how much will you need to invest today to be able to make your down payment?

Q2. An investment promises payments of $3,000 at the end of each of the next 15 years. What is the present value of this investment if the current interest rate is 8%.

Q3. If the nominal interest rate is 10% and the inflation rate is 3.5%, what is the real interest rate? Enter your answer as a percentage.

Q4. An investment promises to pay you $2,000 per year forever with the first payment at time 1. If alternative investments of similar risk earn 1.39% per year, determine the maximum you would be willing to pay for this investment.

Q5. What is the effective annual rate if the annual percentage rate is 12% compounded monthly? Enter your answer as a percentage rounded to two decimal places. Do not include the percentage sign in your answer.

Reference no: EM132977759

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