Reference no: EM132607974

You have got a new job and your salary is $7000. But your office is located far away from your place and taking public transport consumes a lot of your time. So, you decided to purchase a car. You had two options. One option is to pay $ 8125 upfront or the same amount to be settled by three equal payments due three months from now, 18 months from now, and 39 months from now respectively. But for the second option the rate of interest was 6.8% compounded quarterly. What would be the size of equal payment?

Problem 1: Which option do you prefer and why? According to you, how much percentage of income per month is ideal to pay some mortgage? Why do you think so?

You keep on borrowing some money for your personal uses from your dad. The interesting thing is that your dad wants you to realize the value of the money and your financial awareness. So, he has made an agreement with you that the interest on the amount will be compounded monthly at 9% p.a. This month you received a Christmas bonus of $ 4000 and you want to pay all that you have borrowed from your dad. You have two options: either to pay the whole money today from your bonus or to pay in two equal payments: today and three months from today.