Half the required money is taken out of an investment account that pays monthly interest at a 3% annual rate. The rest of the money is borrowed from a bank at a 4% annual interest rate, should payback within 3 years in equal monthly payments. Find the future value of the money taken from the investment account at the end of the shop development and periodic payments to the bank. Calculate Cumulative interest and principal payments.
Half the required money is taken out of an investment account that pays monthly interest at a 3% annual rate. The rest of the money is borrowed from a bank at a 4% annual interest rate, should payback within 3 years in equal monthly payments. Find the future value of the money taken from the investment account at the end of the shop development and periodic payments to the bank. Calculate Cumulative interest and principal payments.
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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If you could solve option 5 with the formulas please
Option 5: Half the required money is taken out of an investment account that pays monthly interest at a 3% annual rate. The rest of the money is borrowed from a bank at a 4% annual interest rate, should payback within 3 years in equal monthly payments. Find the
Transcribed Image Text:Future
Present Value Annual Interest
Duration in
Periodic Payment
Value
Annual
Cumulative
Cumulative
Option
(PV)
Rate
Years
Periods/ Year
(PMT)
(FV)
Payments
Interest
Principal
Option 1: $4,600,000 loan at 3.5% APR.
Bimonthly for 5 years.
Option 2: $5,000,000 loan at 3.8% APR.
Monthly for 6 years.
Option 3: $5,000,000 loan at 3.4% APR.
Quarterly payments of $400,000
Option 4: $150,000/month from store revenue
for 10 months. 2.5% opportunity cost lost.
Option 4: Finance the balance, $3,500,000
from the bank at 3.4% quarterly for 5 years.
Option 5: $2,500,000 from investment
account. 3% opportunity cost lost for 10
months.
Option 5: $2,500,000 from the bank at 4.0%
paid back monthly for 3 years
Transcribed Image Text:Option 5
Loan
APR
Periods/year
Payments (year)
Future value of loan
O Period
Interest
Principal
Balance
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