Homework Chapter 4, Week 3
1. A $50,000 loan is to be amortized over 7 years, with annual end-of-year payments. Which of these statements is CORRECT?
C. The proportion of each payment that represents interest as opposed to repayment of principal would be lower if the interest rate were lower. If the interest rate is low on a loan, the amount of repayment is low. 2. Which of the following statements is CORRECT?
C. to solve for I, one must identify the value of I that causes the PV of the positive CFs to equal the absolute value of the PV of the negative CFs. This is, essentially, a trial-and-error procedure that is easy with a computer or financial calculator but quite difficult otherwise. I must say finding the PV (present
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They expect their investment account to earn 9%. How large must the annual payments at t = 5, 6, and 7 be to cover Ellen's anticipated college costs?
D. $2,292.12
(12 350.5437/ (1, 09^3)) by 3 equal contributions: X*(1, 09^3) + X*(1, 09^2) + X*1, 09 = 9 536.8858, X = 2
b. What would be the value of each bond if they had annual coupon payments?
| |finance the balance. How much will each monthly loan payment be if they can borrow the necessary funds for 30 years at 9% per |
II.|Connie has an investment portfolio in excess of $450,000. She pays Chris $350 to do an analysis of her investments and make recommendations on restructuring the portfolio.|
1. Beverly Frost bought a home for $190,000 with a down payment of $19,000 at 7% for 25 years. Since then the rate has risen to 9%. How much more would her monthly payment be if she bought the house at 9%?
B. The present value of an annuity is unaffected by the number of the annuity payments.
4. What inventory method is used to value inventories? Does this method reflect current cost at year-end?
d. If you can earn 9% per year, how much will you have to save each year if you want to retire in 40 years with $3 million?
a. What is the CD’s value at maturity (future value) if it pays 10 percent annual interest?
9. What is the present value of an 8-year annuity that makes quarterly payments of $73 if
1) Establish the principal and interest amount of the monthly payment. Using the 30 year loan principal and interest amount of the payment is $1,150.92
FVN = FV1= PV × (1 +I)N = $500 x (1 + 0.08) = $500 x 1.08 = $540
1. If Mrs. Beach wanted to invest a lump sum of money today to have $100,000 when she retired at 65 (she is 40 years old today) how much of a deposit would she have to make if the interest rate on the C.D. was 5%?
Rose paid 8% interest on a $12,500 loan balance. Lily paid $5,000 interest on a $62,500 loan. Based on one year:
In question four, Janet was asked to solve a question that deals with annuity payments, specifically, ordinary annuities. It starts by asking of how much you will make if you add $2,000 every year and it is compounded by 10% interest every year. These, for the most part, are future value problems. The first one comes out to be a future value of $12,210.20, which does not satisfy the need for $20,000. The next part asks what the value would be if the interest was compounded semiannually. You have to do an equation in order to find out what the effective annual interest rate. Through this equation you come out with a value of 10.25% and after the calculator calculations you come out with a future value of $12,271.11, also not meeting the demand for that first year of college. The next part asks what payment will you need in order to get to that $20,000 number and the present value comes to be $3,275.95. Next, the case asks what original payment you would need in order
You are saving for the college education of your two children. They are two years apart in age; one will begin college 15 years from today and the other will begin 17 years from today. You estimate your children’s college expenses to be $23,000 per year per child, payable at the beginning of each school year. The annual interest rate is 5.5 percent. How much money must you deposit in account each year to fund your children’s education? Your deposits begin one year from today. You will make your last deposit when your oldest child enters college. Assume four years of college