Question

Mrs. O'Halloran gave $130,000 to the University of Northern British Columbia for a perpetual scholarship fund. What amount can be awarded on each anniversary if the scholarship fund earns 7% compounded annually?

Evergreen Landscaping is applying for a loan. Your help is needed to determine how much they can borrow. They will not be able to make any payments for the first 18 months. After that, they will make payments of $750 per month for five years. There is no interest-free grace period. The first $750 payment will be made 18 months after the loan is received. If the interest rate is 10.5% compounded monthly, how much can they expect to borrow?

Answer 1

	ANSWER
AMOUNT THAT CAN BE AWARDED ON ANNIVERSARY		=	1300000*.07
		=	91000
A	B
STARTING POINT	AFTER 18 MONTHS
		(PAYMENT OF 750 MADE EACH MONTH AFTER POINT B)
Interest rate for 1 month	=	10.5/12
	=	0.875
Present value at point " B"	=	750 PRESENT VALUE ANNUITY FACTOR @.875 % FOR 60 months
	=	750*PVAF(.875%,60months)
	=	750*46.52
	=	34890
Present value at point " A"	=	34890 present value factor(.00875,18)
	=	34890*0.8549
	=	29827.46
evergreen landscape can expect to borrow=	$29827.461
Note-1
	r=rate of interest for the period
calculator techique
for calculation of annuity factor
1/1+r
press = for the number of years
press GT IN CALCULATOR to get the annuity factor