180 5-24. (Loan amortization) Mr. Bill S. Preston, Esq., purchased a new house for $80,000. He paid $20,000 down and agreed to pay the rest over the next 25 years in 25 equal end-of-year payments plus 9 percent compound interest on the unpaid balance. What will these equal payments be? 5-25. (Solving for PMT of an annuity) To pay for your child's education, you wish to have accumulated $15,000 at the end of 15 years. To do this, you plan on depositing an equal amount into the bank at the end of each year. If the bank is willing to pay 6 per- cent compounded annually, how much must you deposit each year to reach your goal? PART 2 The Valuation of Financial Assets 5-26. (Future value of an annuity) In 10 years you are planning on retiring and buying a house in Oviedo, Florida. The house you are looking at currently costs $100,000 and is expected to increase in value each year at a rate of 5 percent annually. Assuming you can earn 10 percent annually on your investments, how much must you invest at the end of each of the next 10 years to be able to buy your dream home when you retire?
180 5-24. (Loan amortization) Mr. Bill S. Preston, Esq., purchased a new house for $80,000. He paid $20,000 down and agreed to pay the rest over the next 25 years in 25 equal end-of-year payments plus 9 percent compound interest on the unpaid balance. What will these equal payments be? 5-25. (Solving for PMT of an annuity) To pay for your child's education, you wish to have accumulated $15,000 at the end of 15 years. To do this, you plan on depositing an equal amount into the bank at the end of each year. If the bank is willing to pay 6 per- cent compounded annually, how much must you deposit each year to reach your goal? PART 2 The Valuation of Financial Assets 5-26. (Future value of an annuity) In 10 years you are planning on retiring and buying a house in Oviedo, Florida. The house you are looking at currently costs $100,000 and is expected to increase in value each year at a rate of 5 percent annually. Assuming you can earn 10 percent annually on your investments, how much must you invest at the end of each of the next 10 years to be able to buy your dream home when you retire?
Chapter4: Time Value Of Money
Section: Chapter Questions
Problem 25PROB
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5-24. (Loan amortization) Mr. Bill S. Preston, Esq., purchased a new house for $80,000.
He paid $20,000 down and agreed to pay the rest over the next 25 years in 25 equal
end-of-year payments plus 9 percent compound interest on the unpaid balance.
What will these equal payments be?
5-25. (Solving for PMT of an annuity) To pay for your child's education, you wish to
have accumulated $15,000 at the end of 15 years. To do this, you plan on depositing an
equal amount into the bank at the end of each year. If the bank is willing to pay 6 per-
cent compounded annually, how much must you deposit each year to reach your goal?
PART 2 The Valuation of Financial Assets
5-26. (Future value of an annuity) In 10 years you are planning on retiring and buying a
house in Oviedo, Florida. The house you are looking at currently costs $100,000 and is
expected to increase in value each year at a rate of 5 percent annually. Assuming you
can earn 10 percent annually on your investments, how much must you invest at the
end of each of the next 10 years to be able to buy your dream home when you retire?
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