Exam_review_session_2_updated

# Exam_review_session_2_updated - Exam review question...

This preview shows pages 1–5. Sign up to view the full content.

Exam review question Chapter 5. 1. You have won the MSU Broad College “Student of the Year” award. Dean Barber has told you the award has a cash prize of \$600, with the prize growing by 11% each year. Your award will be paid out over the next 6 years, with the first payment to be paid at the end of next year. You ask Dean Barber if instead you could be paid in a lump sum payment today. Assuming you have a 15% opportunity cost, how large should the lump sum payment be for you to be fairly compensated? FORMAT TO 4 DECIMAL PLACES. hint: solve with growing annuity formula

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

View Full Document
2. You became an intern of Company A. For the first 3 months, you receive nothing. From 4th month until 8th month, you receive \$200 every month. At the end of year 2, you receive a lump sum payment of \$2000. (From the 9th month until the end of year 2, you receive nothing). Assuming an 8% discount rate, how much is your income worth in today's dollars? FORMAT TO 4 DECIMAL PLACES hint: use CF worksheet ; be careful with the value of "I" you are inputting.
3. You plan to purchase your dream car. The car costs \$825,000. You obtain a 20 year mortgage with monthly payments. Your effective annual interest rate will be 8%, when compounded monthly. What is your monthly payment? How much principal did you paid off during year 10? How much interest did you pay over the course of the loan? hint: Find NOM and then monthly PMT. After then, without resetting your calculator, go into the amortization schedule to figure out how much principal and interest you paid.

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

View Full Document
Chapter 6.
This is the end of the preview. Sign up to access the rest of the document.

## This note was uploaded on 01/29/2012 for the course FI 311 taught by Professor Booth during the Summer '06 term at Michigan State University.

### Page1 / 12

Exam_review_session_2_updated - Exam review question...

This preview shows document pages 1 - 5. Sign up to view the full document.

View Full Document
Ask a homework question - tutors are online