Practice TVM Problems Spring 2011

Practice TVM Problems Spring 2011 - I=5/12=0.4167%...

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Yang Chen (0563079) 351A 1. How much will it cost to go to college 18 years from now, assuming a rate of tuition inflation of 5% per year? Let’s assume it costs $100,000 to complete 4 years of school. I=5% N=4 PV=100,000 FV=121,550.6250 2. How much would you have to save for a newborn baby to go to college 18 years from now. Let’s assume that you could earn 8% annually on your investment and that you would make an equal contribution every month. a. What about if your payments were bi-weekly? N=18*12=216 I=8/12=0.6667% FV=240,000 Pmt=499.691 a. N=18*26=468 I=8/26=0.3077% FV=240,000 Pmt=229.95 3. Your dream car is a BMW 650i, which costs $95,000 fully loaded. Let’s assume you will put $20,000 down and finance the rest. a. How much would your monthly payments be on a 5 year loan at 5% annually? N=5*12=60 I=5/12=0.4167% PV=75,000 PMT=1415.3563 b. What if the loan was a 10 year loan, everything else being equal? N=10*12=120
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Unformatted text preview: I=5/12=0.4167% PV=75,000 PMT=795.5060 c. Reset to the original premise of a 5 year loan with you making a down payment of $20,000. If the dealer offered you 5 year loan with monthly payments of $1,372.79, what annual rate of interest would be implicit in the loan? N=5*12=60 PMT=1372.79 PV=75,000 I=None Yang Chen (0563079) 351A 4. You desire to buy a house in San Francisco, a modest 3 bedroom, 2 bath fixer upper for $850,000. You will make a standard down payment of 20%. If you can finance at 5.15% annually, what will your monthly mortgage payments be? Pv=680,000 I=5.15/12=0.4292% Pmt N 5. You decided that you can only afford monthly payments of $3,200 per month and a down payment of $150,000. What is the maximum value of the home you can acquire assuming a rate of 5.15% annually? Pmt=3,200 I=5.15/12=0.4292% N=360 Pv=586,025.9863 Max value=586,025.9863+150,000=736,025.9863...
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Practice TVM Problems Spring 2011 - I=5/12=0.4167%...

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