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1) Assuming that you employ simple interest methodology, what would be your total investment amount if you invest 1
1) Assuming that you employ simple interest methodology, what would be your total investment amount if you invest 1.000 $ for a 5 year period at an 18% annual interest rate?
a) 1.900 $
b) 900 $
c) 1.200 $
d) 1.500 $
e) Other:
2)Suppose that you obtain a mortgage loan of 100.000 $. Annual rate of interest is 10% and the maturity of the loan is 12 years. You pay annual installments. Now, suppose that you will pay a lumpsum amount of 100.000 $ at maturity to settle the loan. What would be the periodic payment amount?
a) 5.000 $
b) 10.000 $
c) 15.000 $
d) 20.000 $
e) Other:
Expert Solution
1)
Simple Interest = 1 * 18% * 5 = $0.90
Investment amount at the end ot 5 years= 1 + 0.90 = $1.90
Option A is correct
2) Loan Amount = $100
Interest Rate = 10%
As the loan amount of 100 will be paid at maturity, the whole principal is paid at maturity and hence only interest amount is paid annually.
Periodic Amount = 100 * 10% = $10
Option B is correct
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