Cash Flows (periodic compounding)

1. A credit card company charges an interest rate of 1.375% per month on the unpaid balance of all accounts. The annual interest rate they claim is 12*1.375% = 16.5%. What is the annual effective rate of interest being charged by the company?

2. Suppose that a $100 lump-sum amount is invested for 10 years at a nominal interest rate of 6% compounded quarterly. How much is it worth at the end of the 10th year?

3. Stan Moneymaker has a bank loan for $10,000 to pay for his new truck. This loan is to be repaid in equal end-of-month installments for five years with a nominal interest rate of 12% compounded monthly. What is the amount of each payment?

4. Certain operating savings are expected to be 0 at the end of the first six months, to be $1,000 at the end of the second six months, and to increase by $1,000 at the end of each six month period thereafter, for a total of four years. Find the equivalent uniform amount, A, at the end of each of the eight six-month periods if the nominal interest rate is 20% compounded semi-annually.