For college graduation, Jose's dad gives him $15,000 toward a car. Jose thinks it through: With 10K he could probably buy a decent used car, but has his eyes on a Ford F150 pick-up truck that he's wanted that he could buy for about $35,000. He decides to save the money and wait. He invests the $15,000 in a high risk bond that pays 12% interest per year and matures in 8 years. Does Jose have enough money for the truck in 8 years? Show all work.

For college graduation, Jose's dad gives him $15,000 toward a car. Jose thinks it through: With 10K he could probably buy a decent used car, but has his eyes on a Ford F150 pick-up truck that he's wanted that he could buy for about $35,000. He decides to save the money and wait. He invests the $15,000 in a high risk bond that pays 12% interest per year and matures in 8 years. Does Jose have enough money for the truck in 8 years? Show all work.

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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Similar questions

On the road to financial independence, Toby is planning to save and invest regularly. Toby decides to save $64 at the end of each month and invest the money into a financial instrument that gives him 6.3 percent per annum compounded monthly (after tax). How much will Toby receive from his investment (in $ after 10 years? Using information from previous question: If you expect to get $500,000 after 10 years investment, how much money ($) you have to set aside every end of the month?
Your daughter is 8 years old today. You are worried about paying for her college tuition, which you estimate will be $20,000 per year (after scholarships). You decide to start a college savings fund by depositing an equal amount in the bank at the end of each of the next 10 years. At the end of years 11, 12, 13 and 14, you want to withdraw $20,000 in order to pay for the tuition. An interest rate of 8% APR compounded annually is assumed. How much do you have to deposit at the end of each of the next 10 years in order to pay for the tuition costs?
Derek decides to buy a new car. The dealership offers him a choice of paying $518.00 per month for 5 years (with the first payment due next month) or paying some $28,412.00 today. He can borrow money from his bank to buy the car. What interest rate makes him indifferent between the two options? Submit
In 9 years, David's child will go to university. David already has $5,800 set aside in the savings account but plans to contribute an additional $900 at the end of each year to this account for his children's education. He anticipates earning an annual return rate of 5% on his savings throughout that time (compounded annually). When his kid is ready to register for university, how much money will David have in this account? (Round time value factors to 3 decimal places and final answer to 2 decimal places. Omit the "$" sign in your response.)
Joe just graduated from college and has found a nice job. As a graduation gift his father gave him &5,000 as seed money for a down payment for a condominium that Joe plans to purchase in three years. Joe wants to invest his $5,000 into a savings account that gives him the best rate. Bank A has an interest rate of 6.02% compounded quarterly. Bank B has an interest rate of 6% compounded monthly. Which bank's savings account should Joe go with so that he can earn the most money at the end of the three years?
A family friend owns a private comany and wants to raise some cash. The company is not yet public so your friend wants to structure a 3-year debt instrument that looks like a bond that can be sold. The deal is for each one of these that you buy today for $975, you will recieve every quarter a $110 payment. And at the end of the three years (after getting all those payments) you will get a final of S1, 100 payment. What is the yield to maturity after this investment? please show work in excel.
Matt plans to start his own business once he graduates from college. He plans to save $2,000 every six months for the next four years. If his savings earn 8% annually (or 4% every six months), determine how much he will save by the end of the fourth year. (FV of $1, PV of $1, FVA of $1, and PVA of $1) (Use appropriate factor(s) from the tables provided. Round your answer to 2 decimal places.)
. Josiah is considering using his lottery winnings of $900,000 to buy a house. He nust first pay off an existing debt of $300,000. The house is currently worth $700,000 and Josiah is willing to make a down payment of 35% of what is left of his lottery winnings, after he pays his debt of $300,000. He plans to apply for a 25 year mortgage at 5.0%, compounded monthly: a. What size mortgage would Josiah have to borrow to pay off the rest of his new house? b. Find the amount of his monthly mortgage payments c. Find the Total amount of Interest Josiah will pay to the bank, after 25 years.
Suppose that you need $30,000 for your last year of college. You could go to a private lending institution and apply for a signature student loan; rates range from 7% to 14%. However, your Aunt Sally is willing to loan you the money from her retirement savings, with no repayment until after graduation. All she asks is that in the meantime you pay her each month the amount of interest that she would otherwise get on her savings (since she needs that to live on), which is 4%.What is your monthly payment to her, and how much interest will you pay her over the year (9 months)?(Fill in the blanks below and give your answers as whole numbers.)The amount of interest per month you would pay Aunt Sally is $__(1)__ .The total interest you will pay her over the year (9 months)is $__(2)__ .
Mike is planning to take a Caribbean vacation in two years. In order to save money for the trip, he invests his $1200 tax refund. a. Bank 1 offers simple interest of 8 %. At the end of the two years of investment, how much will Mike have in his savings account if he chooses Bank 1? b. Bank 2 offers 3.5% compounded quarterly. At the end of the two years of investment, how much will Mike have in his savings account if he chooses Bank 2? c. If the trip costs $1,350. Is Mike going to be able to accomplish his goal? Which bank should he choose? Explain why.
Holly wants to have $220,000 to send a recently born child to college. She sets up a 529 plan and wants to know how much she must invest at the end of each year for the next 15 years if the funds can earn 4 percent. Use Appendix C to answer the question. Round your answer to the nearest dollar.$ If she can earn 5 percent, how much less will she have to invest each year? Use Appendix C to answer the question. Round your answer to the nearest dollar.$

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