Reference no: EM132370273
1. You are thinking about buying the Benneti Paradigm for $4.95 million. The owner needs to sell soon so he says he'll sell it to you for $4 million if you pay him $6 million in five years. What is the interest rate on this loan?
2. You are just starting graduate school part-time, and you've decided you want to buy a used Patek Phillipe watch when you graduate in four years. The watch will cost $34,995. You think you can save $600 a month during your four years of college. If interest rates are about 4%, will you be able to buy the watch when you graduate?
3. You are thinking about buying Ballast Key off the coast of Florida for $15.8 million. The owner says that if you give him a $2 million down payment, he will give you a 30-year, 5% loan. If you buy it, what will your monthly payment be?
4. If you deposit $1,000 into an account that pays 3% interest, how much will you have in twenty years?
5. You own the 1956 Bentley pictured to the right. The car cost you $45,000, but you need to sell it, and have it listed for $42,000. Your friend says he wants to buy it, but he can't get a loan. He says that he can pay you $9,999 next year, $11,999 the following year, $9,999 in the year after that, and $11,999 in four years. If interest rates are about 2%, should you take the deal? Justify your answer.
6. You have another friend who wants to buy the Bentley. He can't get a car loan either, so he says that if you sell him the car, he'll pay you $54,489 four years from now. If interest rates are about 5%, should you sell him the car? Justify your answer.
7. Suppose you let your second friend buy the car. How much will he have to deposit monthly in order to pay you $54,489 in four years?
8. You just found out that your grandmother set up a trust for you. It will pay you $6,599 a quarter for the next 10 years. If interest rates are about 4%, what is this worth to you now?
9. You won a lawsuit that will provide you with $30,000 three years from now. If interest rates are about 4%, what is this worth to you now?