(Solution) 1ASSIGNMENT 1 Work Out The Following Problems. Please Turn Them In To Me By 4:, Thursday, February 23, 2016. Use Of Tables Is NOT Permitted. Only A... | Snapessays.com


(Solution) 1ASSIGNMENT 1 Work out the following problems. Please turn them in to me by 4:, Thursday, February 23, 2016. Use of Tables is NOT permitted. Only a...


Looking for help with the first few questions on this sheet to get a hang of the way these problems should be approached...1

 

ASSIGNMENT 1

 

Work out the following problems.

 

Please turn them in to me by 4:45 p.m., Thursday, February

 

23, 2016

 

.

 

Use of Tables is NOT permitted.

 

Only a financial calculator or a spreadsheet may

 

be used.

 

This is an individual assignment and perhaps one of the best chances for you to

 

learn and apply time value of money concepts.

 

You may consult other members of the class,

 

but your submission should be made separately and should mention the name of person(s)

 

you worked with.

 

Hand written answers are acceptable.

 

All answers have to be sequential

 

and properly labeled

 

.

 

Answer the questions as if you are taking a test on which partial credit

 

may be awarded for partially correct answers.

 

That is, show all your work and/or inputs.

 

See

 

me if you need help.

 

1.

 

Sam Trunk just turned 35.

 

Till now he has no savings and wants to retire at age 65.

 

Sam

 

and his wife Julie want to draw $4,000 at the end of each month for the next 35 years

 

upon retirement.

 

How much should Sam and Julie save at the end of each month

 

for the

 

next thirty years to meet their retirement goal?

 

Time value of money is 4.8% APR.

 

Show

 

all your work.

 

2.

 

Amanda Weet who is six years old has been gifted $75,000 (after-tax) towards a college

 

fund.

 

Her parents do not have the ability to add any other amounts to the fund and a good

 

four-year college education will cost about $50,000 per year

 

in ten years from now.

 

What

 

rate of return should she earn to be able to withdraw $50,000 at the end of

 

10

 

th

 

, 11

 

th

 

, 12

 

th

 

and 13

 

th

 

year respectively

 

.

 

(Hint: IRR problem, draw a time line)

 

3.

 

An auto dealer has designed a marketing gimmick.

 

They are asking their customers to

 

pay only $99 at the end of each month, for the first two years for a car priced at $10,000.

 

The APR on the vehicle is 4.80% and the total term of the loan is 5 years.

 

What is the

 

monthly payment for the remaining three years?

 

Interest is payable for the entire five year

 

period.

 

4.

 

The Booslers have twenty years remaining

 

on a 5.4%APR thirty-year

 

mortgage that

 

had

 

an initial

 

balance of $500,000.

 

The Bank of Greater Nowhere offers to refinance the loan at

 

3.24% APR for the next twenty years.

 

What is the monthly saving for the Booslers.

 

Show

 

all your work.

 

(Hint:

 

Multi step problem.

 

Figure out outstanding balance first)

 

5.

 

Prepare an amortization schedule for the 121st, 122

 

nd

 

and 123rd payments on a 30-year,

 

3.60% APR, $1 million mortgage loan.

 

Payments are monthly.

 

Show all your work.

 

(Similar concept to problem 4).

 

Month

 

Beginning

 

Balance

 

Monthly

 

Payment

 

Interest

 

Principal

 

Ending

 

Balance

 

121

 

122

 

123

 


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