Please Complete Three Problems And Show Your Work

Question

Please Completethree Problemsand Show Your Work For Full Credit Pl Please complete three problems and show your work for full credit. Please submit in Excel or WORD format. 1) page 245 Effective Annual Interest Rate on Short Term Loans Self Quiz 2) page 248 Effective Annual Interest Rate on Trade Credit Self Quiz 3) page 251 Future Value Self Quiz* (this problem requires the use of a calculator or spreadsheet) i have attached the questions and examples with explaining please do not sign the hand shake before going throw it first and make sure you can do it in 24 hours

Dr. Jack HW Helper · Accepted Answer

Introduction Understanding key financial concepts such as the effective annual interest rate (EAR), trade credit, and future value is essential for making informed financial decisions. This paper aims to address three self-quiz problems from specified pages in a textbook, providing detailed solutions, calculations, and explanations. The problems involve calculating the EAR on short-term loans, determining the EAR on trade credit, and computing the future value of an investment using appropriate financial tools like spreadsheets or calculators. Problem 1: Effective Annual Interest Rate on Short-Term Loans The first problem involves calculating the EAR on short-term loans, typically based on the nominal interest rate and the compounding period. Suppose a short-term loan has a nominal rate of 12% compounded quarterly. To compute the EAR, the formula is: $$ EAR = (1 + \frac{i_{nominal}}{n})^n - 1 $$ where $i_{nominal}$ is the nominal interest rate, and $n$ is the number of compounding periods per year. Applying the values: - $i_{nominal} = 0.12$ - $n = 4$ (quarterly compounding) Calculation: $$ EAR = (1 + \frac{0.12}{4})^4 - 1 = (1 + 0.03)^4 - 1 = 1.1255 - 1 = 0.1255 $$ Thus, the EAR is approximately 12.55%. This rate reflects the true annual cost of the loan considering compounding effects. Problem 2: Effective Annual Interest Rate on Trade Credit Trade credit terms often involve a deferred payment option, but if a firm takes advantage of early payment discounts or assesses the implicit interest, calculating the EAR becomes necessary. Suppose a supplier offers terms of "2/10, net 30": a 2% discount if paid within 10 days, otherwise the full amount due in 30 days. To determine the EAR, compare the cost of not taking the discount (paying later) to the discounted amount. The interest cost of paying late is: $$ Cost = \frac{\text{discount amount}}{\text{payment amount} - \text{discount amount}} \times \frac{365}{\text{difference in days}} $$ Calculating: - Discount

Please Complete Three Problems And Show Your Work

Please Completethree Problemsand Show Your Work For Full Credit Pl

Paper For Above instruction

Introduction

Problem 1: Effective Annual Interest Rate on Short-Term Loans

Problem 2: Effective Annual Interest Rate on Trade Credit

Problem 3: Future Value Self-Quiz

Conclusion

References