Becca wants to save $900 per quarter for 3 years towards the purchase of an appliance. She feels that she can earn 5.42% compounded quarterly for this period of time. If she starts immediately, what is the most expensive appliance that she can purchase?

Becca wants to save $900 per quarter for 3 years towards the purchase of an appliance. She feels that she can earn 5.42% compounded quarterly for this period of time. If she starts immediately, what is the most expensive appliance that she can purchase?

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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Faye wants to save $90 000 in 3 years for a down payment on a house. She plans to make equal monthly payments of $2233.69 into an account earning 7.6% per year compounded monthly. How would Faye's monthly payments change if she saves for twice as long, 7 years? Her payments would be less than half O a) as much. O b) Her payments would increase. Her payments would be exactly half as c) much. d) Her payments would decrease but be more than half as much.
An investment product offers a monthly rate of return of 5%. If Amy invests $1,000 today for this product, how long does it take for Amy's money to grow to $1,500?
Minnie needs to buy a refrigerator. The refrigerator Minnie wants requires a down payment of $2000. The refrigerator is purchased on time, with Minnie planning to pay $2000 at the end of one year and $4000 at the end of 4 years. What is the cash price of the refrigerator if the interest rate is 10% compounded monthly? (Cash = Now)
To finance a vacation in 2 years, Elsie saves $380 at the beginning of every six months in an account paying interest at 13% compounded semi-annually. (a) What will be the balance in her account when she takes the vacation? (b) How much of the balance will be interest? (c) If she waits an additional year to start her vacation, and continues to save the same amount of money, how much more money does she have to spend?
Misty needs to have $20,000 at the end of 6 years to fulfill her goal of purchasing a small sailboat. She is willing to invest a lump sum today and leave the money untouched for 6 years until it grows to $20,000, but she wonders what sort of investment return she will need to earn to reach her goal. Use your calculator or spreadsheet to figure out the annually compounded rate of return needed if she can invest $13,900 today.
Rachel purchased a car for $17,500 three years ago using a 4-year loan with an interest rate of 10.8 percent. She has decided that she would sell the car now, if she could get a price that would pay off the balance of her loan. What is the minimum price Rachel would need to receive for her car? Calculate her monthly payments, then use those payments and the remaining time left to compute the present value (called balance) of the remaining loan.
Cheryl wants to save for a car. She has $4050 in a savings account earning 2.2% compounded quarterly. If Cheryl has four years until she gets her driver’s license, will she have enough to buy a used car that costs $4500? If not, how much more does she need?
A father is now planning a savings program to put his daughter through college. She is 13, plans to enroll at the university in 5 years, and she should graduate 4 years later. Currently, the annual cost (for everything - food, clothing, tuition, books, transportation, and so forth) is $15,000, but these costs are expected to increase by 6% annually. The college requires total payment at the start of the year. She now has $9,000 in a college savings account that pays 8% annually. Her father will make six equal annual deposits into her account; the first deposit today and sixth on the day she starts college. How large must each of the six payments be? (Hint: Calculate the cost (inflated at 6%) for each year of college and find the total present value of those costs, discounted at 8%, as of the day she enters college. Then find the compounded value of her initial $9,000 on that same day. The difference between the PV of costs and the amount that would be in the savings account must be…
Jamie is going to buy some furniture with a single payment loan that is discounted. The loan will be for $5,000 for two years at 10% interest. Calculate the APR on this loan. (Show all work.)
Rachel has a SMART goal to save for the next 7 years to purchase a $100,000 boat. She currently earns $125,000 a year. Her financial advisor believes that she can earn 4% APY on her account. If Rachel plans to save 10% of her monthly income every year, will that allow her to save enough for the boat in her time horizon?
Angela wishes to buy a boat in five years that presently costs $150,000. She expects the cost of the boat to increase due to inflation by 3% per year for the next two years and 4% per year the following three years. She also wants to spend $50,000 per year for 6 years beginning at the end of 10 years from today. How much must she save each year for the next 5 years if she can earn 6% on her investments? a. $66,302.67 b. $64,347.13 c. $65,946.95 d. $61,349.81 e. None of these are correct
Carmen Hernandez has saved $8,000 for a deposit on a car. The highest monthly payment she can afford is $455. The loan will have an APR of 11% payable at the end of each month. She determines which is the most expensive car she can purchase if she buys it on credit payable in 60 months.

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