Q1= Suppose you borrow $15,000 at an interest rate of 8%, compounded monthly over 36 months. At the end of the first year (after 12 payments), you want to negotiate with the bank to pay off the remainder of the loan in eight equal quarterly payments. a. Draw the cash flow diagram for each case? b. What will be the monthly payment before negotiation? c. What will be balance loan after one year? d. What will be the quarterly payment to payback the balance loan if the interest rate remains the same? Q2= Abdullah's current salary is $80,000 per year, and she is planning to retire 25 years from now. He anticipates that his annual salary will increase by 3% each year. (That is, in the first year he will earn $82,400, in the second year $84,872 and so forth.) He plans to deposit 6% of his yearly salary into a retirement fund that earns 8% interest compounded monthly. What will be the amount accumulated at the time of his retirement? Also draw the cash flow diagram? Q3= A woman received $1,500,000 from an insurance company after her husband's death. She wants to deposit this amount in a savings account that earns interest at a rate of 8% compounded monthly. Then she would like to make 48 equal monthly withdrawals over four years such that, when she makes the last withdrawal, the savings account will have zero balance. How much should she withdraw each month? Also draw the cash flow diagram? Q4= Your company borrowed SR 540,000, agreed to pay in eighteen equal monthly installments at 8% compounded monthly. Calculate the remaining loan balance right after the twelfth payment? Also draw the cash flow diagram?
Q1= Suppose you borrow $15,000 at an interest rate of 8%, compounded monthly over 36 months. At the end of the first year (after 12 payments), you want to negotiate with the bank to pay off the remainder of the loan in eight equal quarterly payments. a. Draw the cash flow diagram for each case? b. What will be the monthly payment before negotiation? c. What will be balance loan after one year? d. What will be the quarterly payment to payback the balance loan if the interest rate remains the same? Q2= Abdullah's current salary is $80,000 per year, and she is planning to retire 25 years from now. He anticipates that his annual salary will increase by 3% each year. (That is, in the first year he will earn $82,400, in the second year $84,872 and so forth.) He plans to deposit 6% of his yearly salary into a retirement fund that earns 8% interest compounded monthly. What will be the amount accumulated at the time of his retirement? Also draw the cash flow diagram? Q3= A woman received $1,500,000 from an insurance company after her husband's death. She wants to deposit this amount in a savings account that earns interest at a rate of 8% compounded monthly. Then she would like to make 48 equal monthly withdrawals over four years such that, when she makes the last withdrawal, the savings account will have zero balance. How much should she withdraw each month? Also draw the cash flow diagram? Q4= Your company borrowed SR 540,000, agreed to pay in eighteen equal monthly installments at 8% compounded monthly. Calculate the remaining loan balance right after the twelfth payment? Also draw the cash flow diagram?
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
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Transcribed Image Text:Q1 = Suppose you borrow $15,000 at an interest rate of 8%, compounded monthly over
36 months. At the end of the first year (after 12 payments), you want to negotiate with the
bank to pay off the remainder of the loan in eight equal quarterly payments.
a. Draw the cash flow diagram for each case?
b. What will be the monthly payment before negotiation?
c. What will be balance loan after one year?
d. What will be the quarterly payment to payback the balance loan if the interest rate
remains the same?
Q2= Abdullah's current salary is $80,000 per year, and she is planning to retire 25 years
from now. He anticipates that his annual salary will increase by 3% each year. (That is,
in the first year he will earn $82,400, in the second year $84,872 and so forth.) He plans
to deposit 6% of his yearly salary into a retirement fund that earns 8% interest
compounded monthly. What will be the amount accumulated at the time of his retirement?
Also draw the cash flow diagram?
Q3= A woman received $1,500,000 from an insurance company after her husband's
death. She wants to deposit this amount in a savings account that earns interest at a rate
of 8% compounded monthly. Then she would like to make 48 equal monthly withdrawals
over four years such that, when she makes the last withdrawal, the savings account will
have zero balance. How much should she withdraw each month? Also draw the cash flow
diagram?
Q4= Your company borrowed SR 540,000, agreed to pay in eighteen equal monthly
installments at 8% compounded monthly. Calculate the remaining loan balance right after
the twelfth payment? Also draw the cash flow diagram?
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Step 1: Introduce the problem and initial data
VIEWStep 2: A. Create cash flow diagram for payments before and after negotiation
VIEWStep 3: B. Calculate monthly payment before negotiation
VIEWStep 4: C. Calculate the balanced loan after 1 year
VIEWStep 5: D. Calculate quarterly payment to repay the remaining amount of the loan
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