Master Card and other credit card issuers must print the nominal annual rate (AP
ID: 2812001 • Letter: M
Question
Master Card and other credit card issuers must print the nominal annual rate (APR) on their monthly statements. If the APR is stated as 18.55%, but interest is compounded monthly, what is the card's effective annual rate (EFF%)? Your answer should be between 16.82 and 29.74, rounded to 2 decimal places, with no special characters. Question 18 5 pts An investment promises the following cash flow stream: $1.000 at Time 0: $2,000 at the end of Year 1 (or att - 1); $3.000 at the end of Year 2 and $5.000 at the end of Year 3. At a discount rate of 6.1%. what is the present value of the cash flow stream? Your answer should be between 8343.00 and 11000.00. rounded to 2 decimal places with no special charactersExplanation / Answer
1.EAR=(1+APR/m)^m-1
where m=compounding periods
EAR=(1+0.1855/12)^12-1
=20.21%(Approx).
2.
Present value of inflows=cash inflow*Present value of discounting factor(rate%,time period)
=1000+2000/1.061+3000/1.061^2+5000/1.061^3
=$9736.21(Approx).