Week 3 Fin 419 Assignment Essay

1057 Words May 30th, 2013 5 Pages
FIN/419 - Week 3 Individual Assignment form the readings

P4–23 (LG-2/LG-3) Funding your retirement you plan to retire in exactly 20 years. Your goal is to create a fund that will allow you to receive $20,000 at the end of each year for the 30 years between retirement and death (a psychic told you would die exactly 30 years after you retire). You know that you will be able to earn 11% per year during the 30-year retirement period.
a. How large a fund will you need when you retire in 20 years to provide the 30-year, $20,000 retirement annuity? n= 30 r= 11.00% PVIFA= 30 periods, 11% Rate = 8.693793
Annuity= 20,000 / Present value = $173,876 = 20000 X 8.693793
Answer= $ 173,876 Retirement money required

b. How much will you
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Explain why the interest portion of each payment declines with the passage of time.
Because it is through the annual end of the year payments and the principle balance of the loan is declining creating less interest to be accrued on the original balance.

P4–48 (LG-6) Monthly loan payments Tim Smith is shopping for a used car. He has found one priced at $4,500. The dealer has told Tim that if he can come up with a down payment of $500, the dealer will finance the balance of the price at a 12% annual rate over 2 years (24 months).
a. Assuming that Tim accepts the dealer’s offer, what will his monthly (end-of-month) payment amount be?
a. PMT=$4,000 ÷ (PVIFA 1%, 24) PMT=$4,000 ÷ (21.243) PMT= $ 188.28 Answer: $ 188.28

b. Use a financial calculator or Equation 4.15a (found in footnote 9) to help you figure out what Tim’s monthly payment would be if the dealer were willing to finance the balance of the car price at a 9% annual rate. PMT=$4,000 ÷ (PVIFA 0.75%, 24) PMT=$4,000 ÷ (21.889) PMT= $ 182.74 Answer: $ 182.74

P6–15 (LG-6) Basic bond valuation Complex Systems has an outstanding issue of $1,000-parvalue bonds with a 12% coupon
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