time value money
Amy's subscription to cosmopolitan has ended and she wants to renew it by either paying $15.64 annually at a regular rate (ignoring inflation)or subscribing by lifetime membership paying $100.Payments for regular subscription are made at beginning of the year.if annual opportunity cost is 11.24%,how many years AMY has to live to make lifetime membership a better buy?
problem 2:Sara manager of littman jewellers,want to sell on credit giving customers 3 months to pay.However Sara has to borrow from her bank to provide financing to customers.The bank wil charge an APR of 12% that will be compounded monthly.she quotes an APR to customers based on the effective quarterly rate that will exactly cover hers financing cost.
1. what is effective quarterly rate ?
2.what is the APR Sara should quote to the customers?
3.What is this effective annual rate?
problem 3.John has won a lottery and will recieve $1000 every two years for the next 20 years.The first payment is due to be paid exactly 4 months from today. He has offered to sell the payments to you and has agreed to accept 8% APY for exchange.What is the price you must pay to John?