help Mr. smith has arranged for a mortgage loan of $300.000. The annual rate on
ID: 2772347 • Letter: H
Question
help Mr. smith has arranged for a mortgage loan of $300.000. The annual rate on the loan is 5%. The bank requires Mr. smith to make payments of $3, 000 at the end of every month. How many payments will Mr. smith have to make? The Food Store is planning a major expansion for 7 years from today. In preparation for this, the company is setting aside $8, 000 every half a year, starting today, for the next 7 years. How much money will the firm have when it is ready to expand if it can cam an average of 6% per year on its savings?Explanation / Answer
(a) Monthly Payment = $3000 , r = 5% or 0.05/12 = 0.42%, PV = $300,000, we have to compute N or number of payments.
Use your financial calculator (TVM function) of excel spreadsheet (=NPER function).
compute your answer as 83.77 or 84 payments.
(b) This is question to calculate future value of an annuity, put your calculator in beg. mode
r = 6% or 6/2= 3% on half yearly basis as payment is twice in a year.
PMT = $8,000
N = 7*2 = 14 periods
CPT -> FV as $140,791.31
we can use FV function in excel as =FV(3%,14,8000,0,1) in a cell which produces same answer.
Syntax in excel.
FV(rate,nper,pmt,[pv],[type])
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