Ex. You anticipate a tuition liability of $40,000 per year at the end of 3 and 4 years from now. What are two ways of providing for it that are immune to interest rate risk? The current market interest rate is 8%.
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- Suppose you borrowed $30,000 on a student loan at a rate of 8% and must repay itin three equal installments at the end of each of the next 3 years. How large wouldyour payments be; how much of the first payment would represent interest, howmuch would be principal; and what would your ending balance be after the firstyear? (PMT = $11,641.01; Interest = $2,400; Principal = $9,241.01; Balance atend of Year 1 = $20,758.99)You have a student loan of 40,000$ that you want to repay in 10 years. Interest rates are at 6% per year for every maturity. Assuming annual payments with annual compounding, how much should you pay each year? A) 5,435$ B) 4,000$ C) 4,011$ D) 5,555$ E) 5,226$ F) 6,510$ G) 5,862$ H) 2,402$22. If $120,000 is borrowed to AIB at 15% interest to be paid back over 20 years, how much of the fifteen year's payment is interest (assume annual loan payments)? Hint: 1. Compute PMT 2. Compute the PV at the end of year 14 and the PV at the end of year 15. Compute the difference; you get third year's principal payment. 3. Interest = PMT - 15th year's principal payment. A. $10,883. B. $15,598. C. $16,789. Please provide an accurate answer.
- 31)You plan to invest $5,000 at the end of each of the next 10 years in an account that has a 9 percent nominal rate with interest compounded monthly. How much will be in your account at the end of the 10 years? Do not use MS Excel for solution.Suppose in the question above, the tuition obligations have a Macaulay duration of 4.35 in years, and that you wish to immunize the tuition payments by buying a single issue of a zero coupon bond. What maturity zero coupon bond should you buy? Assume annual compounding. Round your answer to 2 decimal places.Question 1 What is the future value of $650 deposited for one year earning an 10 percent interest rate annually? (Do not round intermediate calculations. Enter your answer as a whole number.) Future value
- Section A 1.Assume the total cost of a university education will be P250 000 when your child enters university in 18 years. You presently have P43 000 to invest. What rate of interest must you earn on your investment to cover the cost of your child’s university education? 2.BT is considering investing in government bonds. The current price of a P100 bond with 10 years to maturity is P88.The bonds have a coupon rate of 6% and repay face value of P100 at the end of the 10 years. Required: Calculate the yield to maturity. 3.Explain four comparative advantages of debt as a source of finance over equity.Assume that you can invest to earn a stated annual rate of return of 12 percent, but where interest is compounded semiannually. If you make 20 consecutive semiannual deposits of $500 each, with the first deposit being made today, what will your balance be at the end of Year 20? Group of answer choices $52,821.19 $57,900.83 $58,988.19 $62,527.47 $64,131.50(a) What is the amount of interest at the end of 2 years on $450 principal for a simple interestrate of 10% per year?(b) Find the principle if the interest amount at the end of 2.5 years is $450 for a simple interestrate of 10% per year.(c) An investment of $50,000 is proposed at an interest rate of 8%. What is the future amountin 10 years? Consider both the simple and compound interests.(d) What is the present worth of $1000 for 6 years, if money is compounded 10% annually.(e) How many years will it take for an investment to double itself if the interest rate is 10%?
- How much money would you need at the present to pay for 4 years of college tuition if the first year was anticipated to cost $40,000 and increased by 5% every year. Assume an interest rate of 8%.Asap 1) Jill, a recent industrial engineering graduate from UWP. would like to put the geometric series to work. She would like to have a $1 million accumulated at the time of retirement 30 years from now. If her annual income increases by 10% and the effective interest rate is 10% per year compounded monthly, determine the deposit she should make at the end of year 3.Tommy John is going to receive $1,000,000 in three years. The current market rate of interest is 10%. Using the present value of $1 table in Exhibit 8 (page 695), determine the present value of this amount compounded annually. Why is the present value of the amount less than $$1,000,00D to be received in the future?