9. Stan wants to have S150,000 available in four years. What sizc quarterly depo
ID: 2617385 • Letter: 9
Question
9. Stan wants to have S150,000 available in four years. What sizc quarterly deposits does Stan have to make into an account that pays 5.6% annual interest compounded quarterly to accomplish his goal? Assume the first deposit is made in one quarter. 10. What are Yorgi obtained a S250,000 mortgage with a fixed rate of 5.6% and a 20-year maturity. Yorgi's monthly payments on the mortgage? 11. Susan is beginning to plan college savings accounts for her two children. Her son Bobby is 8 and will begin college in 10 years when he turns 18. Her daughter Mallory is 2 and wil begin college in 16 years when she is 18. Susan plans to deposit $10,000 per year starting next year into a joint account that earns 8.0% annually. Her last deposit will occur in the year that Bobby starts school. If Bobby's schooling costs S25,000 cach year for four years, and Mallory's schooling costs S30,000 cach ycar for four years, will Susan's plan provide enough money for both her children's college cducation? By how much will Susan meet/miss the goal when she quits depositing money in year 10? (Assume schooling costs are paid after the year is completed, i.e. Bobby's first tuition payment will occur at end of year 11) 12. 1. a cash gift of $10,000 Milly's father has offered to give her one of the following two options: now, or 2. an interest free loan of S50,000 now. The loan would be repaid in five cqual annual payments over the next five years. Assume Milly's opportunity cost of funds is 7%. In present value terms, which option is better for Milly, and how much better is it?Explanation / Answer
Answer to Question 9:
Desired sum after 4 years = $150,000
Annual Interest Rate = 5.60%
Quarterly Interest Rate = 1.40%
Time Period = 4 years or 16 quarters
Quarterly Deposit * FVIFA(1.40%, 16) = $150,000
Quarterly Deposit * (1.014^16 - 1) / 0.014 = $150,000
Quarterly Deposit * 17.79493 = $150,000
Quarterly Deposit = $8,429.37
Answer to Question 10:
Amount borrowed = $250,000
Annual Interest Rate = 5.60%
Monthly Interest Rate = 0.467%
Period = 20 years or 240 months
Monthly Payment * PVIFA(0.467%, 240) = $250,000
Monthly Payment * (1 - (1/1.00467)^240) / 0.00467 = $250,000
Monthly Payment * 144.1391 = $250,000
Monthly Payment = $1,734.44
Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.