Business, 26.02.2020 01:50 bryce2892

Paula is trying to get a loan for $10,000 to start a business as a financial advisor and is trying to decide between several options. (15 points)

i) A $10,000 loan that needs to be paid back after 5 years with a 5% nominal annual interest rate, compounded monthly.
ii) A $10,000 loan that needs to be paid back after 6 years, the first 2 years there is no interest, and after the annual effective interest rate is 10%.
Hint: When solving for the annual payment consider PV=A+A+A(P/A, i%,n), where A is the uniform annual payment.

Assuming that in each case he plans to make equal yearly payments for the full length of the loan, starting in year 1: a. What is the amount of his yearly payment in each case? (2*5 points) b. Now assume that the interest rate of the market is an effective annual rate of 3%, what is the present value of the annuity payments for each option? Based on this metric, which is better? (4+1 points)

Answers: 3

Show answers

Another question on Business

Business, 22.06.2019 19:20

Royal motor corp. generates a major portion of its revenues by manufacturing luxury sports cars. however, the company also derives an insignificant percent of its annual revenues by selling its sports merchandise that includes apparel, shoes, and other accessories under the same brand name. which of the following terms best describes royal motor corp.? a. aconglomerate b. a subsidiary c. adominant-businessfirm d. a single-business firm

Answers: 1

Answer

Business, 23.06.2019 02:50

Camping gear, inc. had 500 units of inventory on hand at the end of the year. these were recorded at a cost of $ 13 each using the lastminusin, firstminusout (lifo) method. the current replacement cost is $ 9 per unit. the selling price charged by camping gear, inc. for each finished product is $ 14. as a result of recording the adjusting entry as per the rule, the gross profit will

Answers: 2

Answer

Business, 23.06.2019 02:50

Which of the following will be a source of cash flows for a shareholder of a certain stock? i. sale of the shares at a future date ii. the firm in which the shares are held paying out cash to shareholders in the form of dividends iii. the firm in which the shares are held increasing the total number of shares outstanding through a stock split

Answers: 2

Answer

Business, 23.06.2019 11:20

Suppose you purchase shares in acme gadget company for $10 per share. the company believes there is a 20 percent chance it will fail to earn a discounted future profit of $1.85. what is the expected rate of return on your investment? suppose you purchase shares in acme gadget company for $10 per share. the company believes there is a 20 percent chance it will fail to earn a discounted future profit of $1.85. what is the expected rate of return on your investment?

Answers: 1

Answer

You know the right answer?

Paula is trying to get a loan for $10,000 to start a business as a financial advisor and is trying t...

Questions

Business, 15.07.2020 01:01

Suppose you invest equal amounts in a portfolio with an expected return of 20% and a standard deviation of returns of 16% and a risk-free asset with a...