15 P

i
n

$90,000.00
6.50%
15

Loan installment
Installment without interest
Interest paid for 4 years
16 Day of Deposit
Last Day
Deposit
Interest rate (quarterly)
Years of deposit
Balance

$9,571.75
$6,000.00
$14,287.00
1-Jan-07
31-Dec-15
$1,000.00
3%
9
1,308.65

17

18 D

RRF

$1.75
1.22

RPm

5%
6%

3%

g
Rs
P0

9%
$56.45

19 Let us assume annual discount rate

Year
0
1
2
3
4
5
6

NPV

10%
Line A
($68,000)
$40,000
$40,000

Line B
($80,000)
$28,000
$28,000
$28,000
$28,000

$1,421.49

$8,756.23

Since, NPV for Line B is highest, we will consider line B is the best Choice

20 - a

Nominal Interest Rate

effective annual return on a
bank account that pays 7.00%
nominal interest with annual
compounding

20-b

Nominal Interest Rate

effective annual return on a
bank account that pays 7.00%
nominal interest with semiannual compounding

20-c

Nominal Interest Rate

effective annual return on a
bank account that pays 7.00%
nominal interest with quarterly
compounding

20-d

Nominal Interest Rate

effective annual return on a
bank account that pays 7.00%
nominal interest with monthly
compounding

20-e

Nominal Interest Rate

effective annual return on a
bank account that pays 7.00%
nominal interest with Daily
compounding

7.00%

7.00%
7.00%

7.12%
6.90%

7.08%
6.85%

7.07%
6.66%

6.89%

7 common stock
preferred stock

60%
40%
12
14.00%

State of Economy
Boom

Probability of
State of
Economy

Stock A

64%

21%

Bust

36%

0.236643
0.143319

20.30%

15%

the best Choice

Line C
($107,000)
$26,000
$26,000
$26,000
$26,000
$26,000
$26,000

$6,236.78

Stock B

Stock C

15%

35%

11%

17%