FOUNDATIONS OF FINANCE-MYFINANCELAB
10th Edition
ISBN: 9780135160619
Author: KEOWN
Publisher: PEARSON
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Chapter 5, Problem 29SP
(Solving for r of an
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(Solving for i of an annuity) You lend a friend $30,000, which your friend will repay in five equal annual end-of-the year payments of $10,000, with first payment to be received 1 year from now. What rate of return does your loan receive?
You lend a friend $10,000, which your friend will repay in 5 equal annual end-of-year payments of $3,000, with the first payment to be received 1 year from now. What rate of return does your loan receive?
I need to be able to use excel and manually calculate as well.
Suppose you take out a $117,000, 20-year mortgage loan to buy a condo. The interest rate on the loan is 5%. To keep things simple,
we will assume you make payments on the loan annually at the end of each year.
a. What is your annual payment on the loan?
b. Construct a mortgage amortization.
c. What fraction of your initial loan payment is interest?
d. What fraction of your initial loan payment is amortization?
e. What is the total of the loan amount paid off after 10 years (halfway through the life of the loan)?
f. If the inflation rate is 3%, what is the real value of the first (year-end) payment?
g. If the inflation rate is 3%, what is the real value of the last (year-end) payment?
h. Now assume the inflation rate is 6% and the real interest rate on the loan is unchanged. What must be the new nominal interest
rate?
i-1. Recompute the amortization table.
i-2. What is the real value of the first (year-end) payment in this high-inflation scenario?
j. What is the real value of the last…
Chapter 5 Solutions
FOUNDATIONS OF FINANCE-MYFINANCELAB
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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Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.Similar questions
- Calculating interest earned and future value of savings account. If you put 6,000 in a savings account that pays interest at the rate of 3 percent, compounded annually, how much will you have in five years? (Hint: Use the future value formula.) How much interest will you earn during the five years? If you put 6,000 each year into a savings account that pays interest at the rate of 4 percent a year, how much would you have after five years?arrow_forwardYou want to invest $8,000 at an annual Interest rate of 8% that compounds annually for 12 years. Which table will help you determine the value of your account at the end of 12 years? A. future value of one dollar ($1) B. present value of one dollar ($1) C. future value of an ordinary annuity D. present value of an ordinary annuityarrow_forwardYou have agreed to loan a friend $5000 for 5 years at a simple interest rate of 8% per year. How much interest will you receive from the loan?arrow_forward
- b) Suppose you begin saving for your retirement by depositing $2,000 per year in an IRA. If the interest rate is 7.5%, how much will you have in 40 years if the payments are made: at the end of the year (ordinary annuity)? at the beginning of the year (annuity due)?arrow_forwardFind the future value of an annuity due with an annual payment of $14,000 for three years at 4% annual interest using the simple interest formula. How much was invested? How much interest was earned? What is the future value of the annuity? $ (Round to the nearest cent as needed.) How much was invested? S How much interest was earned? S (Round to the nearest cent as needed.) ←arrow_forwardTo find the value of an annuity due, you will multiply the value of the ordinary annuity by ___________ You are planning to put $1,750 in the bank at the end of each year for the next six years in hopes that you will have enough money for a down payment on a house. If you are investing at an annual interest rate of 5%, you'll have accumulated _________ at the end of seven years. a. 20,983 b. 14,961 c. 14,249 d. 19, 795 You decided to deposit your money in the bank at the beginning of the year instead of the end of the same year, but now you are making payment of $2,000 at an annual interest rate of 3%. How much money will you have available at the end of 8 years. a. 15,304 b. 18,318 c. 20,983 d. 19,795arrow_forward
- After making payments of $901.10 for 8 years on your 30 year loan at 8.3%, you decide to sell your home. What is the loan payoff?arrow_forward(Components of an annuity payment) You take out a 20-year mortgage for $275,000 to buy a new house. What will your monthly payments be if the interest rate on your mortgage is 6 percent? Use a spreadsheet to calculate your answer. Now, calculate the portion of the 120th monthly payment that goes toward interest and principal. Use five decimal places for the monthly interest rate in your calculations. a. Using a spreadsheet to calculate your answer, your monthly payments will be $ ( Round to the nearest cent.)arrow_forwardSupposed you want to buy a used car but your savings is not enough. To do this, you borrow P60,000 to be amortized in four equal payments at the end of each of the next four years, and the interest rate is paid 15 percent on the outstanding loan. What is the annuity payment?arrow_forward
- Your friend Anne is planning to invest $500 each year for five years and will earn a rate of 5.5 percent per year. a) Determine the future value of this annuity due if her first $500 is invested now. Show your work.b) What is the difference between an annuity due and an ordinary annuity? Explain.arrow_forwardTo save for a down payment on a home, suppose you decide to invest in an annuity that pays 7.0% annual interest, compounded annually. If you contribute $8,000 every year for 5 years, how much interest would you earn during the 5years? Enter your answer, rounded to the nearest cent, without the dollar sign or comma ($21,678.1235 should be entered as 21678.12.)arrow_forwardAfter making payments of $901.10 for 6 years on your 30-year loan at 8.9%, you decide to sell your home. What is the loan payoff?arrow_forward
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