PART A Mr Hopeful has just won R3 500 000 in the LOTTO and has decided to invest the money. At the beginning of the third year he wants to purchase a new BMW 318i for R220 000 and buy his dream house for R2 000 000. He would also like to withdraw R10 000 per month (at the end of each month) for the first 5 years (Years 1 – 5) and R15 000 per month for the next 5 years (Years 1 – 6). The bank has quoted Mr Hopeful the following interest rates: Years 1 – 5 10% effective rate Years 6 – 10 9% APR compounded quarterly REQUIRED: 1. Calculate the nominal annual compounded monthly rate for years 1 -5 and years 6 - 10 2. Calculate the present value of the amount available from LOTTO winnings after Mr Hopeful made all the above purchases. (Assume nominal annual compounded monthly rates of 9.57% for the years 1-5 and 8.93% for the years 6 - 10).
PART A Mr Hopeful has just won R3 500 000 in the LOTTO and has decided to invest the money. At the beginning of the third year he wants to purchase a new BMW 318i for R220 000 and buy his dream house for R2 000 000. He would also like to withdraw R10 000 per month (at the end of each month) for the first 5 years (Years 1 – 5) and R15 000 per month for the next 5 years (Years 1 – 6). The bank has quoted Mr Hopeful the following interest rates: Years 1 – 5 10% effective rate Years 6 – 10 9% APR compounded quarterly REQUIRED: 1. Calculate the nominal annual compounded monthly rate for years 1 -5 and years 6 - 10 2. Calculate the present value of the amount available from LOTTO winnings after Mr Hopeful made all the above purchases. (Assume nominal annual compounded monthly rates of 9.57% for the years 1-5 and 8.93% for the years 6 - 10).
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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PART A
Mr Hopeful has just won R3 500 000 in the LOTTO and has decided to invest the money. At the beginning of the third year he wants to purchase a new BMW 318i for R220 000 and buy his dream house for R2 000 000. He would also like to withdraw R10 000 per month (at the end of each month) for the first 5 years (Years 1 – 5) and R15 000 per month for the next 5 years (Years 1 – 6). The bank has quoted Mr Hopeful the following interest rates:
Years 1 – 5 10% effective rate Years 6 – 10 9% APR compounded quarterly
REQUIRED:
1. Calculate the nominal annual compounded monthly rate for years 1 -5 and years 6 - 10
2. Calculate the present value of the amount available from LOTTO winnings after Mr Hopeful made all the above purchases. (Assume nominal annual compounded monthly rates of 9.57% for the years 1-5 and 8.93% for the years 6 - 10).
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