Exercise_ICT_Part21.pdf - FINANCIAL STATISTICAL FUNCTION...

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1 FINANCIAL & STATISTICAL FUNCTION Exercise 1: You are buying a copier. Would you rather pay $12 000 today or $3 000 a year for five years (if you borrow money at 6 percent per year )? Exercise 2: If at the end of each of the next 10 years I invest $2000 a year toward my retirement and earn 6 percent a year on my investments, how much will I have when I retire? We start with $10000 and invest $2000 per year at end of year for 10 years, how much will I have when I retire? Exercise 3: I am borrowing $10,000 for 10 months with an annual interest rate of 8 percent.What are my monthly payments? How much principal and interest am I paying each month? Exercise 4: I need to borrow $12,000. I can afford payments of $500 per month and the annual rate of interest is 4.5 percent. How many months will it take to pay off the loan? Exercise 5: At the end of each of the next 20 years I will receive the following amounts: Years 1-5 6-10 11-20 Amount $200 $300 $400 Use the PV function to find the present value of these cash flows if the cost of capital is 10 percent. Hint: Begin by computing the value of receiving $400 a year for 20 years, and then subtract the value of receiving $100 a year for 10 years, etc. Exercise 6: You are borrowing $200,000 on a 30-year mortgage with an annual interest rate of 10 percent. Assuming end-of-month payments, determine the monthly payment, interest payment each month, and amount paid toward principal each month. Exercise 7: You are going to borrow $40,000 for a new car. You want to determine the monthly payments and total interest paid for the following situations: - 48 month loan, 6.85% annual rate.
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