1. Mr. Emre Eren wants to buy a car for himself. The price of the car is $ 120,000 and Mr.

Eren will pay 20% of the price as down-payment and will get a loan to finance the balance. The loan will have a maturity of 2 years, and its interest t rate will be 24% per year. The loan will be paid back in equal installments as the end of every month. Bur, Mr. Eren does not want to make any payments at the end of periods 7, 8, and 9. Instead, he wants to make double payments at the end of months 18, 21, and 24. Under these conditions, please answer the following questions. a. How much will be the each installment that Mr. Eren will pay? b. How much of the second payment will be interest payment? c. What is the annual effective rate of this loan?

2. You have a sister and you want to finance the college education of her. You realize that you have to pay $25,000 at the beginning of each year for 4 years. Your sister is going to start school when she completes 18 year, therefore you want to save money to finance her study. You want to put aside 14.278,63 per year, you think if you invest this much money in a bank every year, you will have enough money to finance the study of your sister. If the interest rate is 10%, how old is your sister now?

3. Steaks Galore needs to arrange financing for its expansion progress. One bank offers to lend the required $1,000,000 on a loan which requires interest to be paid at the end of each quarter. The quoted rate is 10 percent, and the principal must be repaid at the end of the year. A second lender offers 9 percent, daily compounding (365-day year), with interest and principal due at the end of the year. What is the difference in the effective annual rates (EFF) charged by the two banks?

4. Turkish Central Bank is expecting an annual inflation rate of 5.3% for the year 2010 based on the TUFE index. However, the inflation rate has been 1.85% and 1.45% in January and February 20120. Under these conditions, what should be the maximum inflation rate in each of the remaining 10 months so that the yearly inflation rate will not exceed 5.3 %?

5. The per capital income of Turkey, based on the purchasing power parity, is $12,390 for 2009. This figure is $ 36,500 for the European Union countries on the average. If Turkey has a growth rate of 4.25 % and EU countries have a growth rate of 1.96 %, how long will it take for Turkey to have the same per capita income as the EU countries? (write down the formula only)

6. On March 21, 2005 The Turkish Treasury has issued 98-day Bills (TB). Their yearly compound (effective) interest rate turned out to be 18.72 % a. What is the annual simple interest rate of these bills? b. If the nominal value of the bills 100.000 YTL, how much were they sold for on March 21? c. If a person who bought these bills on March 21 sold them on March 27, 7 days later, how much profit would he/she make? 7. Recently Ohio Hospitals Inc. Filed for bankruptcy. The firm was reorganized as American Hospitals Inc. and the court permitted a new indenture on an outstanding bong issue to put into effect. The issue has 10 years to maturity and a coupon rate of 10 percent, paid annually. The new agreement allows the firm to pay no interest for 5 years. Then, interest payments will be resumed for the next 5 years. Finally, at maturity (year 10), the principal plus the interest that was not paid during the first 5 years will be paid. However, no interest will be paid on the deferred interest. If the required return is 20 percent, what should the bonds sell for in the market today? 8. G Mart, Inc. is considering the acquisition of equipment to expand its sales. The initial cost of the equipment is $100,000. However, the production manager has estimated the expansion program will increase cash operating costs by $20,000. Assume straight line depreciation to zero salvage, a tax rate of 40%, and a cost of capital of 10%. How much will the additional cash revenue during the 10 year life of the asset have to be to cause of IRR of the project to be equal k? 9. Etna A.S has issued bonds of $ 1,000 with a maturity of 8 years and the coupon rate of 14%. The interest will be paid annually. But you have just found out that the company will not be able to make the interest payments for years 4, 5 and 6 on time. Instead, they will be paid on the day of maturity together with the interest of year 8. If you want a

minimum rate of return of 16% on your investments, how much would you like to pay for these bonds today?

10. You have just been offered a bond for $847.88 The coupon rate is 8% payable annually and interest rates on new issues of the same degree of risk are 10% You want to know how many more interest payments you will receive, but the party selling the bond cannot remember. Can you help him out 11. On March 20, 2001, The Turkish Treasury has issued 98- day bills (TBS). The yearly compound (effective) interest rate turned out to be 193.71% a. What are the annual simple rates of these bonds? b. If the nominal value of these bills is 1 Milyar TL, how much were they sold on March 20? c. If a person who bought these bills on March 20 sold them on March 27, 7 days later, how much profit would he/she make? 12. You have just taken out an installment loan for $100,000. Assume that the loan will be repaid in 12 equal monthly installments of $9,456 and that the first payment will be due one month from today. How much of your third monthly payment will go toward the repayment of principal?