How much of his first payment will be applied to interest

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Reference no: EM131977523

1. Del Monty will receive the following payments at the end of the next three years: $20,000, $23,000, and $25,000. Then from the end of the 4th year through the end of the 10th year, he will receive an annuity of $26,000 per year.

At a discount rate of 10 percent, what is the present value of all three future benefits? Use Appendix B and Appendix D for an approximate answer, but calculate your final answer using the formula and financial calculator methods. (Do not round intermediate calculations. Round your final answer to 2 decimal places.)

2. Your uncle borrows $64,000 from the bank at 10 percent interest over the eight-year life of the loan. Use Appendix D for an approximate answer but calculate your final answer using the formula and financial calculator methods.

a. What equal annual payments must be made to discharge the loan, plus pay the bank its required rate of interest? (Do not round intermediate calculations. Round your final answer to 2 decimal places.)

b. How much of his first payment will be applied to interest? To principal? (Do not round intermediate calculations. Round your final answers to 2 decimal places.)

c. How much of his second payment will be applied to each? (Do not round intermediate calculations. Round your final answers to 2 decimal places.)

3. Your parents have accumulated a $160,000 nest egg. They have been planning to use this money to pay college costs to be incurred by you and your sister, Courtney. However, Courtney has decided to forgo college and start a nail salon. Your parents are giving Courtney $19,000 to help her get started, and they have decided to take year-end vacations costing $8,000 per year for the next four years. Use 9 percent as the appropriate interest rate throughout this problem. Use Appendix A and Appendix D for an approximate answer, but calculate your final answer using the formula and financial calculator methods.

a. How much money will your parents have at the end of four years to help you with graduate school, which you will start then? (Round your final answer to 2 decimal places.)

b. You plan to work on a master’s and perhaps a PhD. If graduate school costs $23,020 per year, approximately how long will you be able to stay in school based on these funds? (Round your final answer to 2 decimal places.)

Reference no: EM131977523

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