Nk-Nk(1+ E)'[1- (1+E)(E)NkA = P,(1+ rt) PN = P. (1+)*PN =dPo = d1. Jefferson and Rio Morales are trying to decide on an account to help save for college for their newbornson Miles. Forest Hills Bank is offering a college savings account that has a promotional 4% interestcompounded monthly for any deposits made in the next month. If they deposit $10,000, then how muchwill be in the account in 18 years?2. Miles' uncle Aaron Davis (Jefferson's brother) is out on the prowl one night and sees an ad for anotherbank offering a special college savings account, which he tells Jefferson and Rio about. If you committo deposits of $80 a month for 18 years, then they are offering a guaranteed rate of 4.5% interestcompounded monthly. How much would they have at the end of 18 years with this account? Is this abetter option? Why or why not? 3. Peter Parker and MJ decide to buy a one-bedroom condo in Manhattan. Determine the monthly paymenton a loan for $750,000 (assume this is after a down payment) if the interest rate is 4% with a term of 30years.4. Spider-Man decides that (for some reason) he needs a new Spider-Mobile (yes, this was actually a thing,look it up!), and he decides that he can afford to pay at most $400 a month. The dealership's loancompany is offering him a 5-year payment plan compounded/paid monthly, with an annual interest rateof 3.4%. What is the most expensive car Spidey can afford, assuming no down payment? That is, givethe maximum loan balance that he could afford at $400 a month.

Future value: It represents the future worth of the present sum of money. The future value is…

Answered: compounded monthly for any deposits…

compounded monthly for any deposits made in the next month. If they deposit $10,000, then how much will be in the account in 18 years?

Corporate Fin Focused Approach

5th Edition

ISBN:9781285660516

Author:EHRHARDT

Publisher:EHRHARDT

Chapter4: Time Value Of Money

Section: Chapter Questions

Problem 2STP

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Question

Nk
-Nk
(1+ E)'
[1- (1+E)
(E)
Nk
A = P,(1+ rt) PN = P. (1+)*
PN =d
Po = d
1. Jefferson and Rio Morales are trying to decide on an account to help save for college for their newborn
son Miles. Forest Hills Bank is offering a college savings account that has a promotional 4% interest
compounded monthly for any deposits made in the next month. If they deposit $10,000, then how much
will be in the account in 18 years?
2. Miles' uncle Aaron Davis (Jefferson's brother) is out on the prowl one night and sees an ad for another
bank offering a special college savings account, which he tells Jefferson and Rio about. If you commit
to deposits of $80 a month for 18 years, then they are offering a guaranteed rate of 4.5% interest
compounded monthly. How much would they have at the end of 18 years with this account? Is this a
better option? Why or why not?

3. Peter Parker and MJ decide to buy a one-bedroom condo in Manhattan. Determine the monthly payment
on a loan for $750,000 (assume this is after a down payment) if the interest rate is 4% with a term of 30
years.
4. Spider-Man decides that (for some reason) he needs a new Spider-Mobile (yes, this was actually a thing,
look it up!), and he decides that he can afford to pay at most $400 a month. The dealership's loan
company is offering him a 5-year payment plan compounded/paid monthly, with an annual interest rate
of 3.4%. What is the most expensive car Spidey can afford, assuming no down payment? That is, give
the maximum loan balance that he could afford at $400 a month.

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