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In: Finance

QUESTION 7 Part A: You owe $60,000 on your credit card. The credit card charges interest...

QUESTION 7

Part A: You owe $60,000 on your credit card. The credit card charges interest monthly and has an APR of 18.0%. You want to pay off the debt in 60 months. What is the monthly payment?

a. 1,624.5

b. 1,523.6

c. 1,752.6

d. 1,758.9

Part B: You want to buy a house, 5 years from now, and you plan to save $60,000 per year, beginning one year from today. You will make 5 deposits in an account that pays 6.0% interest. Your account already has a balance of $50,000. How much will you have just after you make the 5th deposit, 5 years from now (in S’000s)?

a. $376.5

b. $385.8

c. $395.4

d. $405.1

e. $415.2

Expert Solution

1.
PV = 60000
Nper = 60
Rate = 18% / 12 = 1.5%
FV = 0

Monthly payments can be calculated by using the following excel formula:
=PMT(rate,nper,pv,fv)
=PMT(1.5%,60,-60000,0)
= $1,523.6

Monthly payments = $1,523.6

2.
Nper = 5
Rate = 6%
PMT = 60000
PV = 50000

Future value can be calculated by using the following excel formula:
=FV(rate,nper,pmt,pv)
=FV(6%,5,-60000,-50000)
= $405,136.86 or $405.1 (in thousands)

Future value = $405.1

jeff jeffy answered 2 years ago

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