Question

1. Sassy has been advised by her financial planner to invest $30,000 today in an ETF Sustainable Fund. If the fund earns 6% annual return with quarterly compounding, to what amount will her investment grow in 10 years?

Group of answer choices

53,725.43

66,241.19

308,571.54

54,420.55

2

Eduardo is planning to invest $10,000 in a mutual fund at the end of each of the next 10 years. If his opportunity cost rate is 7% compounded annually, how much will his investment be worth after the last annuity payment is made?

Group of answer choices

147,835.99

62,889.46

100,000.00

138,164.48

3

Happy purchased a new jeep today for $35,000. It was financed by using a five-year loan with an 8% simple annual interest rate compounded monthly. How much will Happy owe on his vehicle loan after making payments for two years? (Hint: First find the monthly payment).

Group of answer choices

$25,186.08

$22,590.77

$21,946.80

$22,646.97

Answer 1

1

Future value	FV=	PV * (1+rs/m)^mN
Present value	PV=	30,000
Stated rate of interest	rs=	6.00%
Number of years	N=	10.00
Frequency of compounding per year	m=	4
Future value	FV=	30000 *(1+ 0.06/4)^(10*4)
	FV=	54,420.55

2

FV of annuity	=	P * [ (1+r)^n -1 ]/ r
Periodic payment	P=	$              10,000.00
rate of interest per period	r=
Rate of interest per year		7.0000%
Payment frequency		Once in 12 months
Number of payments in a year		1.00
rate of interest per period		0.07*12/12	7.0000%
Number of periods
Number of years		10
Number of payments in a year		1
Total number of periods	n=	10
FV of annuity	=	10000* [ (1+0.07)^10 -1]/0.07
FV of annuity	=	138,164.48

3

Monthly payment	=	[P × R × (1+R)^N ] / [(1+R)^N -1]
Using the formula:
Loan amount	P	$                                                            35,000
Rate of interest per period:
Annual rate of interest		8.000%
Frequency of payment	=	Once in 1 month period
Numer of payments in a year	=	12/1 =	12
Rate of interest per period	R	0.08 /12 =	0.6667%
Total number of payments:
Frequency of payment	=	Once in 1 month period
Number of years of loan repayment	=	5.00
Total number of payments	N	5 × 12 =	60
Period payment using the formula	=	[ 35000 × 0.00667 × (1+0.00667)^60] / [(1+0.00667 ^60 -1]
Monthly payment	=	$                                                            709.67

Loan balance	=	PV * (1+r)^n - P[(1+r)^n-1]/r
Loan amount	PV =	35,000.00
Rate of interest	r=	0.6667%
nth payment	n=	24
Payment	P=	709.67
Loan balance	=	35000*(1+0.00667)^24 - 709.67*[(1+0.00667)^24-1]/0.00667
Loan balance	=	22,646.97

Answer is $22,646.97