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Determining the value of money

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Determining the value of money

1. Reynaldo Sepúlveda is retiring in 20 years and currently has savings of $ 125,000. Reynaldo thinks he will need $ 650,000 at the beginning of his retirement and has no additional funds saved. He determines the annual interest rate he will need to meet his goal.

2. Suppose you want to buy heavy equipment machinery and a commercial bank will loan you $ 65,000 for the transaction. The loan will be amortized over 5 years and the nominal interest rate will be 8% payable monthly. Calculate the monthly payment and the annual rate (EAR) of the loan to be repaid.

3. Master Paint Industries sales in 2019 were $ 18 million, while in 2017 they were $ 10 million. What will be the growth rate of sales.

4. What will be the present value of a $ 3,500 perpetuity if the interest rate is 7%. If interest rates doubled to 14%, find present value.

5. Find the future value of an ordinary annuity that pays $ 2,350 at 6% over 6 years. It also determines the future value if this were a prepayment annuity.

6. Mr. Del Valle is 54 years old and plans to retire in 8 years. He wants to live at least 20 years after he retires. He has $ 125,000 in savings and expects to earn 7% annual interest. He expects to have an income of $ 45,000, the same that he currently receives from the work he does. Del Valle will begin receiving the benefit from him after 8 years biweekly (24 payments per year) after he retires. Annual inflation is expected to reach 5%. How much Mr. Del Valle must save over the next 8 years to meet the retirement goal.

Reference no: EM133069830

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