How would marias optimal plan change

Assignment Help Finance Basics

Reference no: EM132202064

Question - Maria had received a huge number of parking tickets over a 15-year period but didn't bother to pay any of them. She owes the local municipality 25,088.51 euros in unpaid parking tickets and 22,142.85 euros in late payment fees. To enforce payments of outstanding debt, local municipalities have coordinated with the central government and managed to freeze the assets of citizens with such debt. Recently, the government o ered the possibility of restructuring such debt according to the following rules: (i) Plan A: if 2 to 24 monthly payments of equal value are arranged, then 80% of the late payment fees is forgiven; (ii) Plan B: if 25 to 48 monthly payments of equal value are arranged, then 70% of the late payment fees is forgiven; (iii) Plan C: if 49 to 72 monthly payments of equal value are arranged, then 60% of the late payment fees is forgiven; and (iv) Plan D: if 73 to 100 monthly payments of equal value are arranged, then 50% of the late payment fees is forgiven. In each case, the amount of monthly payment is determined so that the balance is completely paid o when the last payment is made. Maria's son, Jorge, o ers to bail her mother out by providing 34,000 euros in cash. At the same time, Jorge teaches his mother the basics of time value of money and discounting.

1. Suppose that Maria can use the cash she received from Jorge to o er a loan, up to 34,000 euros, to Manuel, a local small business owner who wants to expand his business. Manuel agrees to pay back in monthly installments, of equal value, based on a quarterly APR of 3%. The loan amount and number of monthly payments made by Manuel is to be chosen by Maria. What is the optimal plan that Maria should follow to pay her debt? [You need to specify the exact number of monthly payments to the local municipality and the exact monthly payment amount.]

2. How would Maria's optimal plan change if Manuel o ered a 7% monthly APR? [Again, you need to specify the exact number of monthly payments to the local municipality and the exact monthly payment amount.]

Reference no: EM132202064

Questions Cloud

What is meant by economies of scale : what's meant by economies of scale, and what's the importance of this concept to economic growth?

Calculate the expected return on the US stock : Calculate the expected return on the U.S. stock from the Danish investor's viewpoint, that is, in Danish krone. Please briefly explain your answer

Calculate the labor participation rate with the data : Calculate the labor participation rate with the data given above. Round the percent to the nearest tenth.

Find the sum og series : Find the sum og series 1+(1+3)+(1+3+5)+.......+(1+3+...+15+17)

How would marias optimal plan change : Maria had received a huge number of parking tickets over a 15-year period but didn't bother to pay any of them. How would Marias optimal plan change

What is the maximum amount that karen may deduct : Karen, 28 years old and a single taxpayer, has a salary of $30,000, What is the maximum amount that Karen may deduct

Critically evaluate e-commerce business models : CIS8100 E-commerce Business Strategy Report - critically evaluate e-commerce business models to gain an understanding of their business application

Discuss briefly the assertion that investment by a company : AN INTRODUCTION TO SAFETY ENGINEERING - Discuss briefly the assertion that investment by a company in safety procedures and training reduces

What are the three legal forms of business organization : What are the three legal forms of business organization? which form of organization is dominant in the terms of total profits and why?

User Account

All Pages