EBK FOUNDATIONS OF FINANCE
10th Edition
ISBN: 9780135160473
Author: KEOWN
Publisher: PEARSON CO
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Chapter 5, Problem 14SP
Summary Introduction
To determine: The cost of car in the future and the
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George Robinson is a high school sophomore. He currently has $7,500 in a savings account that pays 5.97 percent annually. George plans to use his current savings plus what he can save over the next four years to buy a car. He estimates that the car will cost $12,545 in four years. How much money should George save each year if he wants to buy the car? (Round factor values to 6 decimal places, e.g. 1.521253 and the final answer to 2 decimal place e.g. 15.25.)
George should save
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tion
Johnny wants to save some money for his daughter Alexis's education. Tuition costs $12,500 per year in today's dollars. Alexis was born today and will
go to school starting at age 18. She will go to school for 4 years. Johnny can earn 11% on his investments and tuition inflation is 7%. How much must
Johnny save at the end of each year, if he wants to make his last savings payment at the beginning of his daughter's first year of college?
O a. $2,694.56.
b. $2,789.04. X
OC. $2,861.65.
O d. $3,176.43.
James wants to buy a car in 5 years. The car is expected to cost $30,000 at that time. How much money would James need to put as a single lump-sum amount today in a savings account earning 4% per year in order to accumulate that $30,000 in five years?
Chapter 5 Solutions
EBK FOUNDATIONS OF FINANCE
Ch. 5 - Prob. 1RQCh. 5 - The processes of discounting and compounding are...Ch. 5 - Prob. 3RQCh. 5 - Prob. 4RQCh. 5 - Prob. 5RQCh. 5 - Prob. 1SPCh. 5 - Prob. 2SPCh. 5 - Prob. 3SPCh. 5 - Prob. 4SPCh. 5 - Prob. 5SP
Ch. 5 - (Compound value) Stanford Simmons, who recently...Ch. 5 - (Future value) Sarah Wiggum would like to make a...Ch. 5 - Prob. 8SPCh. 5 - (Future value) Giancarlo Stanton hit 59 home runs...Ch. 5 - Prob. 10SPCh. 5 - Prob. 11SPCh. 5 - Prob. 12SPCh. 5 - Prob. 13SPCh. 5 - Prob. 14SPCh. 5 - Prob. 15SPCh. 5 - Prob. 16SPCh. 5 - Prob. 17SPCh. 5 - Prob. 18SPCh. 5 - Prob. 19SPCh. 5 - Prob. 20SPCh. 5 - Prob. 21SPCh. 5 - Prob. 22SPCh. 5 - Prob. 23SPCh. 5 - Prob. 24SPCh. 5 - (Solving for PMT of an annuity) To pay for your...Ch. 5 - Prob. 26SPCh. 5 - Prob. 27SPCh. 5 - (Loan amortization) On December 31, Beth Klemkosky...Ch. 5 - (Solving for r of an annuity) You lend a friend...Ch. 5 - Prob. 30SPCh. 5 - (Compound annuity) You plan on buying some...Ch. 5 - (Loan amortization) On December 31, Son-Nan Chen...Ch. 5 - (Loan amortization) To buy a new house you must...Ch. 5 - Prob. 34SPCh. 5 - Prob. 35SPCh. 5 - Prob. 36SPCh. 5 - Prob. 37SPCh. 5 - Prob. 38SPCh. 5 - (Compound interest uith nonannnal periods) a....Ch. 5 - (Compound interest with nonannual periods) After...Ch. 5 - Prob. 41SPCh. 5 - (Spreadsheet problem) To buy a new house you take...Ch. 5 - (Nonannual compounding using a calculator) Jesse...Ch. 5 - (Nonannual compounding using a calculator)...Ch. 5 - (Nonannual compounding using a calculator) Fords...Ch. 5 - Prob. 46SPCh. 5 - (Nonannual compounding using a calculator) Dennis...Ch. 5 - Prob. 48SPCh. 5 - (Calculating the effective annual rate) Youve just...Ch. 5 - Prob. 50SPCh. 5 - Prob. 51SPCh. 5 - (Present value) The Kumar Corporation is planning...Ch. 5 - (Perpetuities) What is the present value of the...Ch. 5 - (Complex present value) How much do you have to...Ch. 5 - (Complex present value) You would like to have...Ch. 5 - Prob. 56SPCh. 5 - Prob. 57SPCh. 5 - Prob. 58SPCh. 5 - Prob. 59SPCh. 5 - (Present value of a complex stream) Don Draper has...Ch. 5 - (Present value of a complex stream) Don Draper has...Ch. 5 - (Complex stream of cash flows) Roger Sterling has...Ch. 5 - (Future and present value using a calculator) In...Ch. 5 - Prob. 1MCCh. 5 - Prob. 2MCCh. 5 - Prob. 3MCCh. 5 - Prob. 4MCCh. 5 - Prob. 5MCCh. 5 - Prob. 6MCCh. 5 - Prob. 7MCCh. 5 - Prob. 8MCCh. 5 - Prob. 9MCCh. 5 - Prob. 10MCCh. 5 - Prob. 11MC
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- 2. Andy is planning to buy a car when he graduates from college 4 years from now. The estimated valueof the car is $25000. He will need to make a down-payment equal to 20% of the value of the car. Heplans to raise the down-payment by making equal monthly deposits into a bank savings account thatpays interest at the rate of 6% per year, so that he has the down-payment, four years from now. Hewants you to help him Ögure out the minimum monthly deposit he will have to make for the next 4years.(a) What is the monthly interest rate the bank pays?(b) At this moment you do not know the value of the monthly deposit he has to make. Let it be Pdollars per month. Write down an expression for the total value of all the monthly payments hewill deposit, (including interest), over the 4 year period.(c) The expression in part (b) should equal the down-payment he will need for the down-payment.Use that information to determine P . Show the work leading to your answer. Round o§ youranswer to the nearest…arrow_forwardBob wants to save $20,000 to buy a new car in 4 years without obtaining a loan. He knows he can invest the money in a CD (certificate of deposit) earning 6% annually. How much money does Bob need to invest today? $15,841.87 $5841.90 $4268.23 $16,425.50arrow_forwardTom wants to go on a cruise for his Senior Trip. He needs $2000 for the trip. Tom is currently a freshman. If he invests in a savings account that earns 5.3% interest compounded monthly, how much money does Tom need to invest today? Round to the nearest dollar.arrow_forward
- Ken wants a $1,000 TV/sound system. He can't afford that amount, so he uses a credit card with 20% annual interest. If he only pays the interest each month on that credit card debt, about how much will he pay in interest in 4 years?arrow_forwardJustin wants to save $45,000 to buy a new car in 5 years without obtaining a loan. He knows he can invest the money in a CD (certificate of deposit) earning 6.3% annually. How much money does Justin need to invest today? $3514.78 $5314.80 $15433.78 $33,154.78arrow_forwardMr. Alex Murphy wants to buy a car in 10 years and he wants to deposit 6000 BDT each month for 5 years. The car price is 756000BDT. What rate will meet his desire to buy the car?arrow_forward
- John, a 25-year-old teacher, wants to start saving for his retirement. John wants a comfortableretirement, so he needs to have one million dollars in his saving account, which pays 2.4% annualinterest rate, when he reaches 67 years of age.a. How much should John deposit into his saving account monthly now? Round your answer to thenearest cent.b. If John wants the one million dollars in his saving account to last him 20 years into hisretirement, how much could he withdraw from the saving account monthly? You can assume thesaving account will pay the same 2.4% annual interest rate. Round your answer to the nearestcent.c. If John increases his monthly deposit in part (a) by $200, how much will be in his saving accountif he wants to retire at 60 years of age? Round your answer to the nearest cent.arrow_forwardThomas has $1,000 in his bank account today to spend on a TV in one year. Thomas needs exactly $1,030 to purchase a new TV in one year (the price of the new TV in one year will be $1030).The investment he is looking for should have how much interest?arrow_forwardDerek has the opportunity to buy a money machine today. The money machine will pay Derek $35,347.00 exactly 11.00 years from today. Assuming that Derek believes the appropriate discount rate is 10.00%, how much is he willing to pay for this money machine?arrow_forward
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