(a) A student invests $150,000 at 9% compound interest to pay for the courses she will take in the spring semester in three years’ time. She expects the total costs for the spring semester in three years’ time to be $205,000. (i) What is the accumulated amount she would have available in three years’ time? (ii) Would she be able to cover her semester fees? (iii)What if the student borrows the $205,000 at 32% simple interest for 24 months; How much money would she have to repay at the end of the 24-month period?
(a) A student invests $150,000 at 9% compound interest to pay for the courses she will take in the spring semester in three years’ time. She expects the total costs for the spring semester in three years’ time to be $205,000. (i) What is the accumulated amount she would have available in three years’ time? (ii) Would she be able to cover her semester fees? (iii)What if the student borrows the $205,000 at 32% simple interest for 24 months; How much money would she have to repay at the end of the 24-month period?
Chapter5: The Time Value Of Money
Section: Chapter Questions
Problem 22P
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(a) A student invests $150,000 at 9% compound interest to pay for the courses she will take in the spring semester in three years’ time. She expects the total costs for the spring semester in three years’ time to be $205,000.
(i) What is the accumulated amount she would have available in three years’ time?
(ii) Would she be able to cover her semester fees?
(iii)What if the student borrows the $205,000 at 32% simple interest for 24 months; How much money would she have to repay at the end of the 24-month period?
(iv)Discuss any other options the student could have tapped into to secure the semesters ‘fee.
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