question archive -In March of 1969, Steve Jones purchased a Nolan Ryan rookie edition baseball card for $0
-In March of 1969, Steve Jones purchased a Nolan Ryan rookie edition baseball card for $0
Subject:FinancePrice: Bought3
-In March of 1969, Steve Jones purchased a Nolan Ryan rookie
edition baseball card for $0.10. As is the tradition with baseball cards, Steve also received a small, thin piece of gum that quickly lost its flavor. Although the gum is currently affixed to the underneath side of a pew in the back of Steve's local church, Steve still has the baseball card and it is in near mint condition. At present, the baseball card is a collector's item that would fetch $700 if sold. If Steve were to sell this card now, what would be the annualized percentage return on his investment?
-The Farmer's and Merchant's State Bank (F&M) of Bushnell is designing a new type of installment loan that charges interest monthly. The bank wishes to charge, effectively 7.75 percent per year on this account. F&M wants to advertise the annual percentage rate (A.P.R.) on this account, rather than the effective annual rate (E.A.R.) of 7.75%, because its competitors state their interest on an annualized basis. What A.P.R. (also called a nominal or stated rate) would F&M have to quote in this case? Why would a bank or finance company prefer quoting the A.P.R. rather than the E.A.R. on their loans?
-Your new job as a financial analyst pays so well that you decide to loan your little sister $1,950 so she can buy a car. You require her to pay you back over 36 months, making payments of $88.40 at the end of each month. What effective annual rate (EAR) are you charging her?
