Time to reach a financial goal You have $28,734.68 in a brokerage account, and y

Question

Time to reach a financial goal

You have $28,734.68 in a brokerage account, and you plan to deposit an additional $4,000 at the end of every future year until your account totals $270,000. You expect to earn 12% annually on the account. How many years will it take to reach your goal? Round your answer to two decimal places at the end of the calculations.

years

Loan amortization and EAR

You want to buy a car, and a local bank will lend you $15,000. The loan will be fully amortized over 5 years (60 months), and the nominal interest rate will be 9% with interest paid monthly.

What will be the monthly loan payment? Round your answer to the nearest cent.

$                                                                                                                           

What will be the loan's EAR? Round your answer to two decimal places.

%

Present and future values for different periods

Find the following values using the equations and then a financial calculator. Compounding/discounting occurs annually. Round your answers to the nearest cent.

An initial $400 compounded for 1 year at 6%.

$  

An initial $400 compounded for 2 years at 6%.

$  

The present value of $400 due in 1 year at a discount rate of 6%.

$  

The present value of $400 due in 2 years at a discount rate of 6%.

$  

Explanation / Answer

1) PV = $28,734.68

PMT = $4,000 (Yearly payments in the account)

FV = $270,000

I/Y = 12%

N = ?

We can solve for N using a financial calculator which is = 14 years

2) PV of loan = $15,000

N = 60 months

I/Y = 9% / 12 = 0.75% (there are 12 compounding periods in a year)

FV = $0

Solving for PMT = $311.38 will be the monthly payment.

3) Effective Annual Rate = (1 + Periodic Rate)m

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