Question 1 (4 points) You need to have $40.000 for a down payment on a house in

Question

Question 1 (4 points) You need to have $40.000 for a down payment on a house in 5 years from now. If you can earn 8.5%, compounded annually, on your savings, how much do you need to deposit today to reach your goal? 1) $21.098.43 2) $ 23.495.98 3) $25,947.39 4) $26.601.82 Question 2(4 points) Atnancially wise individual would prefer taking a loan based on invest his savings in a bank account earning interest and would interest. 1) Compound, compound 2) Compound: simple 3) Simple: compound 4) Simple: simple SAMSUNG Lock 5 6 7 8 9

Explanation / Answer

1. Amount needed todeposit Now = Amount Required / (1 + r)^n

Amount needed todeposit Now = $40000 / (1 + 0.085)^5

Amount needed todeposit Now = $40000 / 1.50366 = $26601.82 (Option 4)

2. Option 3 . Simple ; Compound

3. By Using FVAF Calculator the time required is 4.07 years OPtion 3

4. By Using PVAF Calculator the time required is 65.34 years OPtion 1

5. Option B $40.

Cash Flow = Dividends - 2014 Equity + 2013 Equity (Excluding Retained Earnings)

Cash Flow = $150 - $935 +$825 = $40

6. Compounding. Option 2

7. Option 3. Assets are listed in descending order of liquidity

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