Reference no: EM13862066
Problem 1. If today is Year 0, what is the future value of the following cash flows 10 years from now? Assume an interest rate of 6.9 percent per year.
|
Year
|
Rate
|
PV
|
FVF
|
FV
|
|
2
|
6.9%
|
8500
|
1.7054
|
14495.75
|
|
3
|
6.9%
|
9300
|
1.5953
|
14836.34
|
|
6
|
6.9%
|
7100
|
1.3059
|
9271.91
|
|
|
|
|
$ 38,604.00
|
Problem 2. You have just purchased a new warehouse. To finance the purchase, you've arranged for a 25-year mortgage for 80 percent of the $1,800,000 purchase price. The monthly payment on this loan will be $10,800. What is the APR?
Problem 3. You want to borrow $36,000 from your local bank to buy a new sailboat. You can afford to make monthly payments of $750, but no more. Assuming monthly compounding, what is the highest rate you can afford on a 60-month APR loan?
Problem 4. If the appropriate discount rate for the following cash flows is 11.7 percent per year, what is the present value of the cash flows?
|
Year
|
Cash Flow
|
|
1
|
21,600
|
|
2
|
25,900
|
|
3
|
38,700
|
|
4
|
16,200
|
Problem 5. Eastern Shore Life Insurance Co. is trying to sell you an investment policy that will pay you and your heirs $10,000 per year forever. If the required return on this investment is 5.5 percent, how much will you pay for the policy?