Question

1. An investment will pay $100 at the end of each of the next 3 years, $200 at the end of Year 4, $300 at the end of Year 5, and $500 at the end of Year 6. If other investments of equal risk earn 8% annually, what is this investment’s present value? Its future value?

2. You want to buy a car, and a local bank will lend you $20,000. The loan would be fully amortized over 5 years (60 months), and the nominal interest rate would be 12% with interest paid monthly. What is the monthly loan payment? What is the loan’s EFF%?

Step 1

1)

*Calculate the present and future value of an investment:*

* **Excel workings:*

Step 2

*Excel spreadsheet:*

Step 3

2)

*Calculate the monthly loan payment and loan’s EFF:*

* **Excel worki...*

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