FINANCE
Chapter 4 - class.pdf

Chapter 4 - class.pdf - Problem 1 Suppose you buy a house...

• 3

This preview shows pages 1–2. Sign up to view the full content.

1 Chapter 4 Practice Problems –TIME VALUE OF MONEY APPLICATIONS Problem 1. Suppose you buy a house today with a price of \$25,000 and you plan to pay it within the next 6 years. If you are going to make equal annual end-of-year payments to an investment account that pays 7%, how big do these annual payments need to be? 2. If you can earn 12% on your investments, and you would like to accumulate \$100,000 for your child s education at the end of 18 years, how much must you invest annually to reach your goal? Problem 3. What is the present value of an annuity of \$10,000 to be received at the end of each year for 10 years given a 10 percent discount rate? 4. Suppose you plan to get a \$9,000 loan from a furniture dealer at 18% annual interest with annual payments that you will pay off in over five years. What will your annual payments be on this loan? Problem 5. You have just found the perfect home. However, in order to buy it, you will need to take out a \$300,000, 30-year mortgage at an annual rate of 6 percent. What will your monthly mortgage

This preview has intentionally blurred sections. Sign up to view the full version.

This is the end of the preview. Sign up to access the rest of the document.
• Spring '17
• Chu Mai Linh

{[ snackBarMessage ]}

What students are saying

• As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

Kiran Temple University Fox School of Business ‘17, Course Hero Intern

• I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

Dana University of Pennsylvania ‘17, Course Hero Intern

• The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

Jill Tulane University ‘16, Course Hero Intern