MS 303 QUIZ 2_solution

MS 303 QUIZ 2_solution - P 1 = 165238(165.238 K P 2 = 68...

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MS 303 Quiz 2 Question 1: Suppose you want to buy a house. The bank company offers you 2 different payment plans for the house. Pay 40 K in advance and have equal payments (5K) of 24 months and at the end of 24 th month pay another 40 K. Pay 68 K in advance, have equal payments ( 5.5 K) for 24 months. If the monthly interest rate is %2 for the first year and %1 for the second year, which payment plan is the best for you? Solution: P 1 = 40 + 5 (P/A,%2,12) + 5 (P/A,%1,12) (P/F,%2,12) + 40 (P/F,%2,12) (P/F,%1,12) P 1 = 40 + 5*10.5753 + 5*11.2551*0.7885 + 40*0.7885*0.8874
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Unformatted text preview: P 1 = 165238 (165.238 K) P 2 = 68 + 5.5(P/A,%2,12) + 5.5 (P/A,%1,12) (P/F,%2,12) P 2 = 68 + 5.5*10.5753 + 5.5* 11.2551*0.7885 Question 2: Ryan Atwood decided to invest his money and purchased 200 shares of P&G at a price of $30 per share. He hopes to double his investment. How long will he have to wait if the stock price increases at a rate of 20% per year? What should be rate of increase per year for the investment to double in 7 years? Solution: $60 = $30 (F/P, 20%, N) 2= (1.20) N log (2) = N log (1.20) ) 20 . 1 log( ) 2 log( = N N = 3.8 years...
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This note was uploaded on 03/16/2012 for the course FENS 101 taught by Professor Selçukerdem during the Fall '12 term at Sabancı University.

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MS 303 QUIZ 2_solution - P 1 = 165238(165.238 K P 2 = 68...

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