For college graduation, Jose's dad gives him $15,000 toward a car. Jose thinks it through: With 10K he could probably buy a decent used car, but has his eyes on a Ford F150 pick-up truck that he's wanted that he could buy for about $35,000. He decides to save the money and wait. He invests the $15,000 in a high risk bond that pays 12% interest per year and matures in 8 years. Does Jose have enough money for the truck in 8 years? Show all work.
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- The Turners have 10 years to save a lump-sum amount for their child’s college education. Today a four-year college education costs $75,000, and this is expected to increase by 10% per year into the foreseeable future. Solve, a. If the Turners can earn 6% per year on a conservative investment in a highly rated tax-free municipal bond, how much money must they save each year for the next 10 years to afford to send their child to college? b. If a certain college will “freeze” the cost of education in 10 years for a lump-sum of current value $150,000, is this a good deal?A father wants to help provide a college education for his young son. He can afford to invest $600/yr. for the next 4 years, beginning on the boy’s fourth birthday. He wishes to give him $4000 on her 18th, 19th, 20th, and 21st birthdays, for a total of $16,000. Assuming 5% interest, what uniform annual investment will he have to make on the son’s 8th through 17th birthdays?Booker graduated from Baruch 10 years ago and now wants to buy his first condo. He has saved enough for a $100,000 down payment and now wants to get a $400,000 mortgage to cover the cost of his new $500,000 home. His bank is offering him either a 3% 15-year mortgage or a 4% 30-year mortgage. How much would he have to pay each month for the 3% 15-year mortgage? and How much would he have to pay each month for the 4% 30-year mortgage?
- Tom and Mary James just had a baby. They heard that the cost of providing a college education for this baby will be $100,000 in 18 years. Tom normally receives a Christmas bonus of $4,000 every year in the paycheck prior to Christmas. He read that a good stock mutual fund should pay him an average of 10 percent per year. Tom and Mary want to make sure their son has $100,000 for college. Consider each of the following questions. a.How much does Tom have to invest in this mutual fund at the end of each year to have $100,000 in 18 years? b. Tom’s father said he would provide for his grandson’s education. He puts $10,000 in a government bond that pays 3 percent interest. His dad said this should be enough. Do you agree? c. If Mary has a savings account worth $50,000, how much must she withdraw from savings and set aside in this mutual fund to have the $100,000 for her son’s education in 18 years?Pierre is deciding whether he should rent or buy a house. Assuming that renting an apartment will cost of him $1,500 per month and the mortgage on a house is $3,500 per month. If he rents, he considers investing the difference between monthly rental cost and mortgage cost in a Balanced Fund earning 8% per year. If the house he purchases in Oshawa, Ontario costs about $800,000 and he intends on paying off the mortgage after 25 years. If he decides to sell the house in 25 years and the house appreciates at a rate of 4% per year: Question 1 What would be the better outcome, renting or buying and by how much? (Show your work and include all financial calculators) Calculate the investment value of renting versus home ownership. Question 2 Based on your answer in Question 1, what factors would make you change your mind and choose the other. List a minimum of 3 reasons or factors and elaborate as to why.Tom and Mary James just had a baby. They heard that the cost of providinga college education for this baby will be $100,000 in 18 years. Tomnormally receives a Christmas bonus of $4,000 every year in the paycheckprior to Christmas. He read that a good stock mutual fund should pay himan average of 10 percent per year. Tom and Mary want to make sure theirson has $100,000 for college. Consider each of the following questions:a. How much must Tom invest in this mutual fund at the end of each year tohave $100,000 in 18 years?b. If the bonus is not paid until the first of the year, how much must Tominvest at the beginning of each year to have $100,000 in 18 years? c. Tom’s father said he would provide for his grandson’s education. He puts$10,000 in a government bond that pays 3 percent interest. His dad said thisshould be enough. Do you agree?d. If Mary has a savings account worth $50,000, how much must she withdrawfrom savings and set aside in this mutual fund to have the $100,000 for…
- You have a newborn son. You want to plan for his future and there are 2 things that you would like to be able to give him. At the age of 18, you want to buy him a car, which will cost $30,000. At the age of 18, you would like to send him to college, costing $20,000 each year for 4 years. You plan to start on his 1st birthday making annual deposits through his 18th birthday. Assuming a 10% interest rate, how much money will you need to deposit each year to be able to meet these financial goals?4. Holly wants to have $200,000 to send a recently born child to college. She sets up a 529 plan and wants to know how much she must invest at the end of each year for the next 18 years if the funds can earn 5 percent. If she can earn 7 percent, how much less will she have to invest eachSuppose that your parents are willing to lend you $20,000 for part of the cost of your college education and living expenses. They want you to repay them the $20,000, without any interest, in a lump sum 15 years after you graduate, when they plan to retire and move. Meanwhile, you will be busy repaying federally guaranteed loans for the first 10 years after graduation. But you realize that you won’t be able to repay the lump sum without saving up. So you decide that you will put aside money in an interest-bearing account every month for the five years before the payment is due. You feel comfortable with putting aside $275 a month (the amount of the payment on your college loans, which will be paid off after 10 years). How high an annual nominal interest rate on savings do you need to accumulate the $20,000 in 60 months, if interest is compounded monthly? Enter into a spreadsheet the values d 5 275, r 5 0.05 (annual rate), and n 5 60, and the savings formula with r replaced by r/12 (the…