Calculating Annuity Payment Periods, EPR & Annual Percentage Rate (APR).
1. Calculating Number of Periods One of your customers is delinquent on his accounts payable balance. You've mutually agreed to a repayment schedule of $300 per month. You will charge .9 percent per month interest on the overdue balance. If the current balance is $17,000, how long will it take for the account to be paid off?
2. Calculating EAR Friendly's Quick Loans, Inc., offers you "three for four or knock on your door.\ This means you get $3 today and repay $4 when you get your paycheck in one week (or else). What's the effective annual return Friendly's earns on this lending business? If you were brave enough to ask, what APR would friendly's say you were paying?
3. Valuing Perpetuities Live Forever Life Insurance Co. is selling a perpetuity contract that pays $1,200 monthly. The contract5 currently sells for $63,000. What is the monthly return on this investment vehicle? What is the APR? The effective annual return?