Quiz 3 sec 2 Sol - money you deposit now in order to fund...

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IE 343 Spring 2010 Name: Section 2, Quiz 3 (last) (first) Closed book, closed notes. No calculators. 1. Imagine you are a parent, and your child is going to college next year. Tuition fees amount to $18,000 a year for 4 years. You plan on depositing a lump sum of money today in a bank account paying 5% interest a year, so that you can make these annual tuition fee payments. The first tuition fee payment you make will be a year from now. (3) Draw a cash-flow diagram depicting cash deposits and withdrawals into the bank account (from your point of view). (3) Write an expression for the lump sum of
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Unformatted text preview: money you deposit now in order to fund these annual tuition fee payments. Sol: = $18000 = $18000 ( | , 5%, 4) 2. Youve just bought a house worth $250,000 here in West Lafayette. As part of the mortgage deal, you have to make a down payment of 20% now. T he remaining amount must be paid in equal annual installments for 30 years at the rate of 6% compound interest per year. (4) Write an expression for your annual mortgage payments. Sol: = , 6%, 30 = $250,000 1 0.2 ( | , 6%, 30) A A A A P...
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This note was uploaded on 02/07/2012 for the course IE 343 taught by Professor Vincent,g during the Spring '08 term at Purdue University-West Lafayette.

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