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Question
How much would $20,000 due in 50 years be worth today if the discount rate were 7.5%?a. $438.03
b. $461.08
c. $485.35
d. $510.89
e. $537.78
Answer
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Suppose that you're planning a vacation and borrow $2,000 from a bank for one year at a stated annual interest rate of 14 percent, with interest prepaid (a discounted loan). Also, assume that the bank requires you to maintain a compensating balance equal to 20 percent of the initial loan value. What effective annual interest rate are you being charged?a. 14.00%b. 8.57%c. 16.28%d. 21.21%e. 28.00%
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Which of the following is not correct for a firm with seasonal sales and customers who all pay promptly at the end of 30 days?
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b. False