LOAN AMORTIZATION AND EAR You want to buy a car, and a local bank will lend you $20,000. The loan will be fully amortized over 5 years (60 months), and the nominal interest rate will be 12% with interest paid monthly. What will be the monthly loan payment? What will be the loan’s EAR?
PRESENT AND FUTURE VALUES FOR DIFFERENT INTEREST RATES Find the following values. Compounding/discounting occurs annually.
An initial $500 compounded for 10 years at 6%.
An initial $500 compounded for 10 years at 12%
The present value of $500 due in 10 years at 6%
The present value of $1,552.90 due in 10 years at 12% and at 6%
Define present value and illustrate it using a time line with data from part d. How are present values affected by interest rates?