Week2 Assignment Essay

2704 Words Oct 20th, 2012 11 Pages
Coursera - Intro to Finance (Quiz-2),
Question 1
(5 points) Carlos goes to the bank to take out a personal loan. The stated annual interest rate is 12%, but interest is compounded monthly and he will make monthly payments. The effective annual interest rate (EAR) of the loan is less than 12%. Your Answer | | Score | Explanation | False | | 5.00 | Correct. You understand compounding. | Total | | 5.00 / 5.00 | |
EXCEL Function - EFFECT(0.12,12) 12 times Npery and rate .12
Question 2
(5 points) Gloria is 35 and trying to plan for retirement. She has put a budget together and plans to save $4,800 per year, starting at the end of this year, in a retirement fund until she is 65. Assume that she can make 7% on her account. How
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Your Answer | | Score | Explanation | (yes, gain 4647) | | 15.00 | Correct. Good job as this is a complete problem. | Total | | 15.00 / 15.00 | |
Current monthly=PMT(0.09/12,180,240000,0) . New MP = =PMT(0.06/12,60,117266) Difference 167.17 PV of all savings =PV(0.06/12,60,167.17,0). Finally deduct 4000 fee
Question 10
(15 points) You are interested in a new Ford Taurus. After visiting your Ford dealer, doing your research on the best leases available, you have three options. (i) Purchase the car for cash and receive a $1,500 cash rebate from Dealer A. The price of the car is $15,000. (ii) Lease the car from Dealer B. Under this option, you pay the dealer $500 now and $200 a month for each of the next 36 months (the first $200 payment occurs 1 month from today). After 36 months you may buy the car for $8,000. (iii) Purchase the car from Dealer C who will lend you the entire purchase price of the car for a zero interest 36-month loan with monthly payments. The car price is $15,000. Suppose the market interest rate is 6%. What is the net cost today of the cheapest option? (Enter just the number without the $ sign or a comma; round off decimals.Since this asks for a cost, you just enter the number without a negative sign.)
Answer for Question 10

Your Answer | | Score | Explanation | 13500 | | 15.00 | Correct. You understand and can solve real life problems. | Total | | 15.00 / 15.00 | |
First option total cost --

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