In: Finance
A. You expect to receive $28,000 at graduation in two years. You
plan on investing it at 9.75 percent until you have $163,000.
How long will you wait from now? (Do not round intermediate
calculations and round your answer to 2 decimal places, e.g.,
32.16.)
Period __________ years
B. An investment offers to quadruple your money in 36 months
(don’t believe it).
What rate per year are you being offered? (Do not round
intermediate calculations and enter your answer as a percent
rounded to 2 decimal places, e.g., 32.16.)
Rate ________%
C. You need $91,000 in 11 years.
If you can earn .58 percent per month, how much will you have to
deposit today? (Do not round intermediate calculations and
round your answer to 2 decimal places, e.g., 32.16.)
Deposit today
$
_________
D. You want to buy a new sports coupe for $75,300, and the
finance office at the dealership has quoted you a loan with an APR
of 7.7 percent for 36 months to buy the car.
What will your monthly payments be? (Do not round
intermediate calculations and round your answer to 2 decimal
places, e.g., 32.16.)
Monthly payment
$
__________
What is the effective annual rate on this loan? (Do not
round intermediate calculations and enter your answer as a percent
rounded to 2 decimal places, e.g., 32.16.)
Effective annual rate
%____________
E. You are to make monthly deposits of $800 into a retirement
account that pays an APR of 9.8 percent compounded monthly.
If your first deposit will be made one month from now, how large
will your retirement account be in 31 years? (Do not round
intermediate calculations and round your answer to 2 decimal
places, e.g., 32.16.)
Retirement account value in 31 years
$
________
F. Beginning three months from now, you want to be able to
withdraw $3,700 each quarter from your bank account to cover
college expenses over the next four years.
If the account pays .77 percent interest per quarter, how much do
you need to have in your bank account today to meet your expense
needs over the next four years? (Do not round intermediate
calculations and round your answer to 2 decimal places, e.g.,
32.16.)
Amount needed
$
__________
G. You’ve just joined the investment banking firm of
Dewey, Cheatum, and Howe. They’ve offered you two different salary
arrangements. You can have $7,800 per month for the next two years,
or you can have $6,500 per month for the next two years, along with
a $35,000 signing bonus today. Assume the interest rate is 6
percent compounded monthly.
If you take the first option, $7,800 per month for two years, what
is the present value? (Do not round intermediate
calculations and round your answer to 2 decimal places, e.g.,
32.16.)
Present value
$
_________
What is the present value of the second option? (Do not
round intermediate calculations and round your answer to 2 decimal
places, e.g., 32.16.)
Present value
$
__________
H. You have just purchased a new warehouse. To finance the
purchase, you’ve arranged for a 37-year mortgage loan for 75
percent of the $3,370,000 purchase price. The monthly payment on
this loan will be $17,000.
What is the APR on this loan? (Do not round intermediate
calculations and enter your answer as a percent rounded to 2
decimal places, e.g., 32.16.)
APR
%__________
What is the EAR on this loan? (Do not round intermediate
calculations and enter your answer as a percent rounded to 2
decimal places, e.g., 32.16.)
EAR
%____________
I.
Consider the following cash flows:
Year | Cash Flow | |||
2 | $ | 21,800 | ||
3 | 39,800 | |||
5 | 57,800 | |||
Assume an interest rate of 8.6 percent per year.
If today is Year 0, what is the future value of the cash flows five
years from now? (Do not round intermediate calculations and
round your answer to 2 decimal places, e.g., 32.16.)
Future value
$
__________
If today is Year 0, what is the future value of the cash flows ten
years from now? (Do not round intermediate calculations and
round your answer to 2 decimal places, e.g., 32.16.)
Future value
$
___________
A. The present value (P) is $28,000. Future value (F) is $163,000. Interest rate (r) is 9.75% or 0.0975 . Time (n) is to be calculated. Future value is calculated by following metod:
N will be derived by laking logarithm:
Thus the money need to be invested for 18.93 years to get desired future value.
B. Quadruple means the investment will be four times. It means $1 will become $4 in 36 months. thus P is $1, F is $4, n is 36 months and r is need to be calculated.
r will be derived as follows:
Thus, interest rate will be 3.93% monthly.
C. n is 11, F is 91,000 and r is 0.58% per month or 0.58 12= 6.96 per year.
P is to be calculated as below;-
=43,411.63
Thus, $43,411 need to be invested to get desired value.