Question

In: Finance

1. Ben invested $8,500 twenty years ago with an insurance company that has paid him 6...

1. Ben invested $8,500 twenty years ago with an insurance company that has paid him 6 percent simple interest on his funds. Charles invested $8,500 twenty years ago in a fund that has paid him 6 percent interest, compounded annually. How much more interest has Charles earned than Ben over the past 20 years?

2. You have $5,000 you want to invest for the next 45 years. You are offered an investment plan that will pay you 6 percent per year for the next 15 years and 10 percent per year for the last 30 years. How much will you have at the end of the 45 years?

3. You want to purchase a new condominium that costs $287,500. Your plan is to pay 25 percent down in cash and finance the balance over 15 years at 3.65 percent. What will be your monthly mortgage payment including principal and interest?

**Can you explain the PV, n, i, PMT, and FV? I just need to know how its the right answer***

Solutions

Expert Solution

1.

The interest earned by Ben is calculated below:

Interest earned by Charles is calculated below:

The extra interest earned by Charles is $27,260.65 - $10,200 = $17,060.65.

2.

The future value at the end of 45 years is calculated below:

3.

The amount of loan is $287,500*0.75 = $215,625.

Interest per month is (3.65%/12) = 0.304167%.

Total number of payments is (15*12) = 180.

Monthly payment is calculated below:

PV is $215,625.

n is 180.

i is 0.304167%.

PMT is $1,557.40.

FV is $0.


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