# Interest Rates Problems With Sample Solutions

- Determine the month-end payment for a $200,000, 10-year loan with an interest rate of 12

percent, compounded monthly. (Assume there is no down payment)- Calculate the outstanding loan amount after 18 months.
- Redo part A,assuming it is a mortgage loan with monthly payments.

- You expect your newly born child to attend college in 18 years. You have $12,000 to set aside for that purpose. You also expect that the total cost of college education to be $100,000 by that time. Calculate the interest rate at which you have to invest today to achieve your goal.
- You want to buy a new sports coupe and need $30,000 loan and the finance company affiliated with the dealership is offering 6.9% APR loan and the loan calls for 60 monthly payments. What will be your monthly payments and also the effective interest rate on the loan?
- The current exchange rate between the United States and Britan is $1.825 per pound. The 6-month forward rate between the British pound and the U.S. dollar is $1.79 per pound. What is the percentage difference between current 6-month U.S. and British interest rates?
- Find the interest rate implicit in a loan of $100,000 that the borrower discharges with two annual installments of $55,307 each, paid at the end of each of the next two years.

Required: Calculations of present and future value (or single payments and for annuities, to make the exercises more realistic, we do not give specific guidance with each individual exercise.; - On July 1, 200X you enter into a note payable of $200,000 with a 5% annual interest rate. Your interest expense for 200X will be?
- Post Company issues a 6 year, 6%, $200,000 bond at par on July 31. The journal entry would be:
- Post Company issues a 6 year, 6%, $200,000 bond at par on July 31. How much interest will be paid over the life of the bond?
- A company has current assets of $500,000, net income of $10,000, current liabilities of 250,000 and equity of $250,000. What is the current ratio?
- If a company has gross salaries of $12,000 and it withholds $1,800 for income taxes and $800 for FICA taxes, the journal entry to record the employee s pay should include:
- A 6.25% semi annual coupon bond with 22 years left to maturity is priced to offer a 5.5% yield to maturity. You believe that in one year, the yield to maturity will be 6%. If this occurs please compute your total return of the bond in dollars and in percent for this one year holding period. Assume a $1000 face value. Please explain how you came to the answer

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