Problem 12. (a) (5 marks) Cersei wants to set up a college fund for her son...

Problem 12.

(a) Cersei wants to set up a college fund for her son Tommen. Investments deposited at the Iron Bank of Braavos earn 8% interest per year, compounded quarterly. If Cersei invests $7000 with the Iron Bank of Braavos, how long will it take her investment to be worth $126 000?

(b) Cersei also take out a $212 000 mortgage to buy a home in King’s Landing, amortizing it over 30 years at 5.5%, compounded monthly.

(a) What are her monthly payments?

(b) What is the remaining principal after 18 years?

Expert Solution

First:

Calculator
Inputs:
PV	(7,000.00)
PMT	-
FV	126,000.00
Rate	8.00000%

Output:
Number of payments	37.56

It takes 37.56 years

Second part:

Payment each period
Calculator
Inputs:
FV	-
PV	212,000.00
Rate (I/Y) per period	0.458%
Term N payments	360

Output:
PMT	($1,203.71)

Payment is 1,203.71

b

Balance is:


Calculator
Inputs:
PV	212,000.00
PMT	($1,203.71)
Rate (I/Y)	0.458%
Term N	216.00

Output:
FV	($126,683.64)

Balance after 18 years is 126,683.64

jeff jeffy answered 2 years ago

Problem 12. Show your work! (a) (5 marks) Cersei wants to set up a college fund...

Problem 12. Show your work! (a) Cersei wants to set up a college fund for her son Tommen. Investments deposited at the Iron Bank of Braavos earn 8% interest per year, compounded quarterly. If Cersei invests $7000 with the Iron Bank of Braavos, how long will it take her investment to be worth $126 000? (b) Cersei also take out a $212 000 mortgage to buy a home in King’s Landing, amortizing it over 30 years at 5.5%, compounded monthly....

Samantha wants to set up a fund which will provide in perpetuity a scholarship of $2,600...

Samantha wants to set up a fund which will provide in perpetuity a scholarship of $2,600 to a deserving student at the end of each year with the first payment being made one year from today . Find the amount Betty should deposit today into the fund to provide for this scholarship if the interest rate is 3.8% compounded quarterly.

Betty Lovelace wants to set up a fund which will provide in perpetuity a scholarship of...

Betty Lovelace wants to set up a fund which will provide in perpetuity a scholarship of $2,600 to a deserving student at the end of each year with the first payment being made one year from today . Find the amount Betty should deposit today into the fund to provide for this scholarship if the interest rate is 3.8% compounded quarterly

Lionel wants to set up a fund for his son's education such that he could withdraw...

Lionel wants to set up a fund for his son's education such that he could withdraw $1,295.00 at the beginning of every 3 months for the next 6 years. If the fund can earn 3.30% compounded semi-annually, what amount could he deposit today to provide the payment?

The Kucharskis have decided to invest in a college fund for their young son. They invested...

The Kucharskis have decided to invest in a college fund for their young son. They invested $30,000 in a deferred annuity that will pay their son at the beginning of every month for 4 years, while he goes to college. If the account earns 3.00% compounded monthly and the annuity payments are deferred for 15 years, what will be the size of the monthly payments?

You set up a college fund in which you pay $3500 each year at the beginning...

You set up a college fund in which you pay $3500 each year at the beginning of the year. How much money (in $) will you have accumulated in the fund after 29 years, if your fund earns 7% compounded annually?

Lucy set up a savings fund for her son's education so that she would be able...

Lucy set up a savings fund for her son's education so that she would be able to withdraw $1,775 at the beginning of every month for the next 5 years. The fund earns 4.35% compounded quarterly. a. What amount should she deposit today to allow for the $1,775 periodic withdrawals? $77,923.75 $95,595.71 $95,940.99 $78,771.17 b. How much interest would she earn in this investment? $95,940.99 $10,559.01 $106,500.00 $10,904.29

You set up a college fund in which you pay $5000 each year atthe beginning...

You set up a college fund in which you pay $5000 each year at the beginning of the year. How much money (in $) will you have accumulated in the fund after 24 years, if your fund earns 9% compounded annually?

You set up a college fund in which you pay $2500 each year atthe end...

You set up a college fund in which you pay $2500 each year at the end of the year. How much money will you have accumulated in the fund after 10 years, if your fund earns 8% compounded annually?

Susan is beginning to plan college savings accounts for her two children. Her son Bobby is...

Susan is beginning to plan college savings accounts for her two children. Her son Bobby is 8 and will begin college in 10 years when he turns 18. Her daughter Mallory is 2 and will begin college in 16 years when she is 18. Susan plans to deposit $10,000 per year starting next year into a joint account that earns 8.0% annually. Her last deposit will occur in the year that Bobby starts school. If Bobby’s schooling costs $25,000 each...

Question