Principles of Finance:

2. First National Bank charges 14.1 percent compounded monthly on its business loans. First United Bank charges 14.4 percent compounded semiannually.

Calculate the EAR for First National Bank and First United Bank. (Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.)

EAR

  First National

 %  

  First United

 %  

As a potential borrower, which bank would you go to for a new loan?

3. You are planning to make monthly deposits of $450 into a retirement account that pays 8 percent interest compounded monthly. If your first deposit will be made one month from now, how large will your retirement account be in 25 years? (Do not round intermediate calculations and round your final answer to 2 decimal places, e.g., 32.16.)

  Future value

$   

4. You want to buy a new sports car from Muscle Motors for $71,000. The contract is in the form of a 72-month annuity due at an APR of 6.9 percent. What will your monthly payment be? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)

  Monthly payment

$   

5. Prepare an amortization schedule for a five-year loan of $57,000. The interest rate is 9 percent per year, and the loan calls for equal annual payments. (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16. Leave no cells blank - be certain to enter "0" wherever required.)

Year

Beginning Balance  

Total Payment  

Interest Payment  

Principal Payment  

Ending Balance

1

$ 

$ 

$ 

$ 

$   

2

3

4

5

How much interest is paid in the third year? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)

  Interest paid

$   

How much total interest is paid over the life of the loan? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)

  Total interest paid

$