What is the present value of Dollar 3, 000 paid at the end of each of the next 8

Question

What is the present value of Dollar 3, 000 paid at the end of each of the next 88 years if the interest rate is 6% per year? The present value is Dollar f. Round to the nearest cent. You are thinking of purchasing a house. The house costs Dollar 350, 000. You have Dollar 50, 000 in cash that you can use as a down payment on the house, but you need to borrow the rest of the purchase price. The bank is offering a 30-year mortgage that requires annual payments and has an interest rate of 5% per year. What will be your annual payment if you sign this mortgage? The annual payment is S f. Round to the nearest dollar. You receive a Dollar 11, 000 check from your grandparents for graduation. You decide to save it toward a down payment on a house. You invest it earning 5% per year and you think you will need to have Dollar22, 000 saved for the down payment. How long will it be before the SI 1, 000 has grown to Dollar 22, 000 ? To double the money you received from your grand parents, it will take years. Round to one decimal place.

Explanation / Answer

1)

PV = 3000*PVIFA(6,88)

where, PVIFA(r,n) = [1-(1+r)^-n]/r

PV = 3000*165678 = $49703.4

2)

effectively we need to borrow 350000-50000 = $300000

PV of cash flow = $300000

let annual payment = P

300000 = P*PVIFA(5%,30)

300000 = P*15.3725

P = 300000/15.3725 = $19515.37

3)

let no of year taken = n years

22000 = 11000*1.05^n

taking logarithm both sides

n = (log2)/(log1.05)

n = 14.20 years

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