Question
Thanks again .
You realize that you will have to build a new hospital in ten years. You have a chance to purchase ten acres in a growing section of your community. You have taken out a ten-year loan with annual payments of $13,200. The loan rate is 6%. At the end of ten years, you believe that the value of the land will be $200,000. If the future price is correct, did you make a wise investment? Select one: Bad Choice, You bought the property for 115,487 and had a value of $200,000. A growth rate of 5.65% Neither Good nor Bad Choice, You bought the property for 111,679 and had a value of $200,000. A growth rate of 6.00%. The same as you paid for it. Good Choice, You bought the property for 77,451 and had a value of $200,000. A growth rate of 9.951% Good Choice, You bought the property for 97,153 and had a value of $200,000. A growth rate of 7.48% You graduate and take your first job paying you $80,000 per year. You decide you will put $10,000 per year into your retirement plan and your employer will contribute $4,000. How long will it take you to have $1,000,000 in your retirement plan if you can average 11% per year? Select one: Approximately 21 years Approximately 16 years Approximately 23 years Approximately 19 years You have just turned 25 and may now spend a portion of the trust fund your parents established for you. The terms of the trust fund allow you to withdraw 60 beginning-of-the-year cash flows of $100,000 each. An investment firm has offered to pay you cash for all of the fund today. If the rate they use to discount the cash flows is 16% per year, what is their offer price today for your pension fund? Select one: $1,383,888 $724,902 $844,115 $1,127,532 Your hospital intends to finance the purchase of a new MRI. The cost for the MRI and installation is $1,500,000. What is the monthly payment for this loan if the loan is amortized over a ten-year period amortized monthly at a rate of 6.50%? Select one: $13,990 $12,634 $17,032 $15,887 You have a $1,200,000 investment portfolio and wish to spend $87,500 per year on an ordinary annuity. If the investment account earns 6% annually, how long will your portfolio last? Select one: 32.10 years 27.9 years 24.6 Years 29.7 years
Explanation / Answer
1. Value of loan = 13200/1,06 + 13200/1,06^2 + 13200/1,06^3 .....13200/1,06^10=$97,153.15
Grwoth rate with future value = $200,000
200000= $97,153.15*(1+g)^10
g= 7.48%
Answer-
d. Good choice, You bought the property for 97,153 and.. growth rate of 7.48%
2.Total contribution per year = 10,000+4000= $14000
Let it take n years to reach 1,000,000
Future value of savings = $1000,000
14000*1.11^(n-1) + 14000*1.11^(n-2) + 14000*1.11^(n-3) + 14000*1.11^(n-4) + 14000*1.11^(n-5).....14000 = 1000000
by hit and trial,
n = 21 years
Answer: a. Approx 21 years
3.offer price = present value of cash flows
Offer price = 100000 + 100000/1.16 + 100000/1.16^2 + 100000/1.16^3.....100000/1.16^59=$724,902
b. $724,902
4. Let monthly payment be x
Present value of payments = $1500,000
1500,000 = x/(1+6.5%/12) + x/(1+6.5%/12)^2 + x/(1+6.5%/12)^3.....x/(1+6.5%/12)^120
x= $17032
c. $17032
5. Let the number of years = n
preent value of spend = $1200,000
$1200,000 = 87500/1.06 + 87500/1.06^2 + 87500/1.06^3+ 87500/1.06^4....87500/1.06^n
n =29.7 years
d. 29.7 years
