Financial Planning Exercise 4 Calculating single payment loan amount due at maturity Chase Boyd plans to borrow $8,000 for 6 years. The loan will be repaid with a single payment after six years, and the interest on the loan will be computed using the simple interest method at an annual rate of 10 percent. How much will Chase have to pay in six years? $ How much will he have to pay at maturity if he's required to make annual interest payments at the end of each year? $

Financial Planning Exercise 4 Calculating single payment loan amount due at maturity Chase Boyd plans to borrow $8,000 for 6 years. The loan will be repaid with a single payment after six years, and the interest on the loan will be computed using the simple interest method at an annual rate of 10 percent. How much will Chase have to pay in six years? $ How much will he have to pay at maturity if he's required to make annual interest payments at the end of each year? $

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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Tutorial Exercise Suppose that your bank pays 6% interest, compounded quarterly. Use Table 12-2 to find how much should be deposited now to yield an annuity payment of $1,600 at the end of each three months, for 3 years. Step 1 The present value of an annuity is the amount needed now so that desired annuity payments may be made in the future. Since payments will be made at the end of each three months, this is an ordinary annuity. To find the present value of this annuity, the amount of money that should be deposited in an account now, the interest rate per period must first be found. The interest rate per period is calculated using the nominal, or annual, rate and the number of periods per year as follows. nominal rate interest rate per period = periods per year The rate was given to be 6%. Interest is compounded quarterly, or 4 times per year. Find the interest rate per period. nominal rate interest rate per period periods per year 4 |% The total number of compounding periods will be…
Question 1 A family has a 30-year $880, 000 mortgage at 8% compounded monthly. (1) Find the monthly payment and the total interest paid (2) After 10 years, suppose the family decides to add an extra $150 to its mortgage payment each month. How long will it take the family to pay off the remain mortgage? (3) How much interest will the family save?
Time to repay installment loan Personal Finance Problem Mia Salto wishes to determine how long it will take to repay a $18,000 loan given that the lender requires her to make annual end-of-year installment payments of $3,379. a. If the interest rate on the loan is 14%, how long will it take for her to repay the loan fully? b. How long will it take if the interest rate is 11%? c. How long will it take if she has to pay 18% annual interest? d. Reviewing your answers in parts a, b, and c, describe the general relationship between the interest rate and the amount of time it will take Mia to repay the loan fully. a. If Mia can borrow at an annual interest rate of 14%, the amount of time it will take for her to repay the loan fully is years. (Round to two decimal places.) C
15- Assume a lender offers you a $45,000, 10%, three-year loan that is to be fully amortized with 6 annual payments. The first payment will be due one year from the loan date. How much will you have to pay each year?
13Assume you plan to borrow $400,000 from your bank to buy a home. The bank offers: • a 5-year fixed rate of 6.05%, compounded monthly. • a 3-year fixed rate of 5.75%, compounded monthly. If you choose to repay the borrowing in equal installments monthly over a 20 years, what would be the difference between your monthly payments at the two different APRs? a. $89.32 b. $68.94 c. $26.98 d. $154.58 14You expect that the interest rate will decrease in the near future, therefore you eventually choose the 3-year fixed rate. Then, what will be your mortgage balance after 3 years? a. $321,598.59 b. $452,321.21 c. $365,056.12 d. $379,325.89 15Three years passed, it's time to renew your mortgage. Upon your renewal, your bank is now offering a new 3-year fixed rate of 4.5%, what would be your monthly repayment amount after renewal? a. 2825.32 b. 2598.54 c. 1965.21 d. 2563.60
Question 2 Assuming you only make the required monthly payments, how much will you still owe on 30 year mortgage at the end of 139 months. Assume an initial principal amount of 525,587 and an APR of 3% with monthly compounding.
Time to repay installment loan Personal Finance Problem Mia Salto wishes to determine how long it will take to repay a $18000 loan given that the lender requires her to make annual end-of-year installment payments of $3906. a. If the interest rate on the loan is 11%, how long will it take for her to repay the loan fully? b. How long will it take if the interest rate is 8%? c. How long will it take if she has to pay 14% annual interest? d. Reviewing your answers in parts a, b, and c, describe the general relationship between the interest rate and the amount of time it will take Mia to repay the loan fully.
Problem 3 You are working for a finance firm and a client comes to you and wants to know how much money they should put in an annuity (which earns 2.885% interest compounded quarterly) at the end of each three months for the next 36 years. Their goal is that when they retire at the end of 36 years, they would like the quarterly withdrawals from the annuity to total $68,000 per year and that the annuity is to last for the next 23 years. You are to determine the amount which your client needs to deposit into the annuity at the end of each three months for the next 36 years so that they can meet their retirement goal. Do the following: A. Show all your work that you used to answer this problem. Label the steps and important values as you solve the problem. Note that when you use the TVM Solver, show the all variables and the values you entered (into the variables) and solved for. B. Find the total amount of interest client will earn (from the time they start contributing to the account to…
Problem 6-10 A borrower is making a choice between a mortgage with monthly payments or biweekly payments. The loan will be $200,000 at 6 percent interest for 20 years. Required: a. What would be the maturity period if payments are bi-weekly? How much will the borrower pay in total under each payment option? Which choice would be less costly to the borrower? b. Assume that the bi-weekly loan was available for 575% What would be the maturity period if payments are bi-weekly? How much will the borrower pay in total under each payment option? Which choice would be less costly to the borrower? Complete this question by entering your answers in the tabs below. Required A Required B What would be the maturity period if payments are bi-weekly? How much will the borrower pay in total under each payment option? Which choice would be less costly to the borrower? (Do not round intermediate calculations. Round your final answers to 2 decimal places.) Maturity period Total monthly payments Total…
Problem 5 A person plans to make a series of equal quarterly deposits of $1,500 each into a savings account, which pays 6.5%, compounded daily. The first deposit is made at the start of the first quarter and the last payment is paid at the end of the last quarter. Show work to determine how much will be accumulated in the savings account after ten years, right after the last deposit is made? Assume 91 days per quarter and 365 days per year.
QUESTION 14 Suppose you have a credit card balance of $15,000 and you want to pay it off in two years. What will the monthly loan payment be if the APR on the credit card is 24%?

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