User Account

All Pages

Compute the effective annual interest rate

Assignment Help Finance Basics
Reference no: EM133070486

You are working as a personal financial adviser. Alecia, one of your clients approached you for consultation about her plan to buy her dream house that costs $400,000. Alecia has a saving of $100,000 and is considering two alternative options:

Investment 1: Investing that $100,000 in an investment that would pay a rate of return of 9% annually, compounding semi-annually for 15 years.

Investment 2: Buying her dream house now. Then Alecia needs to borrow $300,000 mortgage from Prosperity Bank. The current interest rate the bank offered for the new mortgage is 4% annually, compounding monthly. The standard life of mortgage in Australia is 30 years.

Required:

-Compute the effective annual interest rate (EAR) Alecia would actually get in Investment 1.

-Calculate the amount of money Alecia would accumulate in Investment 1 after 15 years.

-In Investment 1, how many year longer does Alecia need to wait until she has $400,000 to buy her dream house?

-Calculate the monthly mortgage payment Alecia needs to pay for 30 years in Investment 2. In investment 2, if Alecia leases the house to a company for a rent of $400 per week for 10 years, and put that rent in her bank account at the beginning of each week, how much money she will have in her bank account after 10 years if the interest rate is 3.5% annually, assuming compounding weekly?

Reference no: EM133070486

Questions Cloud

Crime prevention and risk assessment project : Design a solution which will reduce the occurrence of risk to the problem(s) you identified in your literature review and risk assessment/survey in the TE.
Discuss the components of situational crime prevention : Describe Crime Prevention and discuss the components of situational crime prevention. Explain what the purpose of a Risk Assessment Report is.
Unit 5 Measurement and Estimating For Quantity Surveying : Unit 5 Measurement and Estimating For Quantity Surveying Assignment Help and Solution, BTEC HND Quantity Surveying - Assessment Writing Service
Conventional mortgage lenders : Why are mortgage products like these offered by FHA, and what are their relationships to traditional mortgage products offered by conventional mortgage lenders?
Compute the effective annual interest rate : You are working as a personal financial adviser. Alecia, one of your clients approached you for consultation about her plan to buy her dream house that costs $4
Corrections system american law : Describe ways in which you experience, witness, or are aware of racial bias and discrimination in the correctional system.
The case of the prison in crisis : Explain at least three significant policy changes you would recommend to reduce overcrowding and improve prison conditions in the long-term.
What is the profitability index for project : Cori's Sausage Corporation is trying to choose between the following two mutually exclusive design projects:
Evaluate the significance of the reportable irregularity : VBS Mutual Bank The South African Institute of Chartered Accountants has announced that its disciplinary committee has ordered that former chairperson of the V

Reviews

Write a Review

Finance Basics Questions & Answers

  What is the project npv if the discount rate is given

A proposed nuclear power plant will cost $2.3 bill... A proposed nuclear power plant will cost $2.3 billion to build (today) and then will produce cash flows of $310 million a year for 5 years (year 1 to year 5). It then must be decommissioned at ..

  Possible risks for the money cares investment corporation

For this assignment you must identify possible risks for the Money Cares Investment Corporation. In establishing an investment company, you must answer the following

  Services for new year world exposition

Great Lakes Clinic has been asked to provide exclusive health care services for new year's World Exposition. Although flattered by the request

  What is the per share value of gdy stock

What is the per share value of GDY stock when the required return is 15%?

  Now recalculate the tax disadvantage using the same income

a. calculate the tax disadvantage to organizing a u.s. business today as a corporation as compared to a partnership

  Solve problem of the verbrugge corporation

Verbrugge Corporation is a leading U.S. producer of automobile batteries. Verbrugge turns out 1,500 batteries a day at a cost of $6 per battery for materials.

  Suppose the three-year spot rate

Suppose the three-year spot rate is actually 3.75 percent, how could you take advantage of this? Explain

  What is the effective annual interest rate on the loan

What is the effective annual interest rate on the loan? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places).

  Minimum expected annual return for share

She has decided to invest in shares 1,2 and 3 with 25% in share 1, 50% in share 2 and 25% in share 3. If shares 1 and 2 have expected returns of 9% and 10% per year, then what is the minimum expected annual return for share 3 that will enable mega..

  What is the option value of waiting

Jennifer is considering opening a dessert shop in Harvard Square, In this example, what is the option value of waiting

  What is the expected dividend per share

What is the expected dividend per share for each of the next 5 years? Round your answers to the nearest cent.

  Derive our expression in the chapter for the portfolio

Derive our expression in the chapter for the portfolio weight in the minimum variance portfolio. (Danger! Calculus required!)

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

Submit Assignment

Academics

Major Subjects

Majors

Get In Touch

whatsapp: +1-415-670-9521

Phone: +1-415-670-9521

Email: [email protected]

TERMS & POLICIES

HELP & SUPPORT

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd