Question

A) Anna is borrowing $19,700 from her parents today at an interest rate of 4.2%. she will make monthly payments of $325 starting October 17, 2020, to repay the loan. how many payments will be necessary? round to whole number

B)Nathan is preparing to make his first monthly contribution of $781 today to prepare for retirement. his retirement goal is $609,000 and he hopes to earn 9.4% interest, how many contributions will it take? round to whole number

C) Maddy is ready for retirement from Quanta. Quanta's plan is 144 monthly payments of $2,059, starting today. if her discount rate is 10.2%, what is the minimum she would take as a lump sum instead?

D) Kathy is making her first contribution of $995 today and plans to make her last one on august 17, 2045. if her retirement account earns 7.9% interest, how much will be in her account on September 17, 2045?

E)Lam Research has two retirement plans. one is the lump sum distribution of $233,300 paid upon retirement. the other is the 13 years of monthly payments, with the first of the 156 payments made one month after retirement. what is the implied interest rate?

Answer 1

A) Borrowed Amount = 19700, 1st payment due after 1 month. Rate 4.2% pa. So monthly rate is 0.35%

Put values in texas BA 2 Calculator

PV= -19700, I/Y=0.35,PMT= 325, FV=0 compute N = 68 approx

So,Approx 68 month end payment required to fully repay the loan.

B) 1st payment due today so BGN mode required in texas BA 2 calculator.

After BGN mode selctio put values as: PMT= -781, PV=0, FV=609000, I/Y= 9.4/12=7.833. compute N= 250 Approx

Approx 250 Beginning monthly payments required to accumulate 609000.

C) In this question also payment start from today so BGN mode required.

Put values ,N=144, I/Y=10.2/12=0.85, PMT=2059, FV=0, compute PV= 352093

352093 Can be taken lump sum today instead of monthly payments

D) 1st Contribution today and last will be on 17th Aug,2045 and we ned to calculate value on 17th Sep 2015..so total period would be 25years or monthly payment 25 x 12 = 300.

Again BGN mode required.

N=300, I/Y= 7.9/12=0.6583, PV=0, PMT= -995, compute FV= 239237

Approx 239237 in her account on 17th sept 2045

E) Implied Interest Rate is the rate at which Lam research would be indifferenct between lumpsum and monthly payments. You can get this rate by equating Lump sum with the Monthly payments.Here in the question monthy contribution is missing so can't calculate rate.