Assuming constant rate of inflation

Assignment Help Financial Management

Reference no: EM131185134

Suppose there exists a bank that offers an APR of 5.4% indefinitely on current deposits.

a) If you wanted to setup an account that would pay monthly instalments of $3000 indefinitely, how much should your initial deposit be?

b) Assuming a constant rate of inflation of 3.3%, what should your initial investment be in order to maintain a monthly payment equivalent to the present value of $3000?

Reference no: EM131185134

Questions Cloud

Interest in semi annual payments : Bills bonds pays 8% yearly interest in semi annual payments for 10 years. The current yield on similar bonds is 11%. To determine the market value of this bond, you must: a. Find the interest factors for 10 periods at 7%, b. Find the interest factor ..

Consider the cost alternatives : Consider the following cost alternatives with 10 year useful lives. The company has a MARR = 15%. Using suitable Excel functions, perform an incremental IRR analysis to determine the best alternative. Clearly lay out each step of the analysis and its..

What interest rate would make : What interest rate would make it worthwhile to incur a compensating balance of $28,000 in order to get a 1 percent lower interest rate on a 1 year, pure discount loan of $315,000?

List a way low income might interfere with your life : One out of five older older adults have income from earnings . In 2014 ,the median annual income of the four-fifths of people age 65 and older and older who are fully retired was $18,096.Use this figure to develop a monthly budget ($1500 a month) wha..

Assuming constant rate of inflation : Suppose there exists a bank that offers an APR of 5.4% indefinitely on current deposits. If you wanted to setup an account that would pay monthly instalments of $3000 indefinitely, how much should your initial deposit be?

Contracts with businesses will be governed by common law : You are the manager of Acme Fireworks, a fireworks retailer who sells fireworks, puts on ground display fireworks, and large aerial display fireworks. The company started in the owner’s garage two years ago and now has 15 employees that you manage. D..

Advantages-disadvantages of internal rate of return rule : What is the amount of the depreciation expense for the four year for this company if it just purchased some fixed assets classified as 5-year property for MACRS? The assets cost $15,000. List and briefly discuss the advantages and disadvantages of th..

Compare the share price with the deferred dividend : Suppose the board of a company decides to invest $250 million of cash in 1 year government bills yielding 4% and use the proceeds from the sale of the bills to pay a higher dividend next year. What would be the company's share price in this case? Com..

Managing the cost of fuel in such volatile environment : For the past year, oil prices have been extremely volatile, particularly within the past few months from a low of $26 per barrel to now in the mid 40's. As a CEO of Southwest, what would your strategy for managing the cost of fuel in such volatile en..

User Account

All Pages