Question
1) You have a current electric bill averages $1200 per year. If you plan to retire in 20 years and inflation for electricity is 3%
1) You have a current electric bill averages $1200 per year. If you plan to retire in 20 years and inflation for electricity is 3% per year, what will your electric bill be in 20 years?
2 )Youre planning to buy a house in the current price range of $200,000. The price of houses in this price range is increasing at 2% per year. If you put 10% down ($20,000 now) you can get a 30 year fixed rate loan at 5% APR compounded monthly. If you put 20% down, you can get a 30 year fixed rate loan at 3%. You have enough how to make a 10% down payment, but wont have enough for a 20% down payment until next year. Your savings account earns 5% APR compounded monthly. How much will you save in present value terms by waiting one year and putting down the larger down payment?
3) You won a 10-year-old car and are considering whether to buy a new car now. Your car will last three more years whereupon you will buy a new car. The new car cost $23,000 today and prices on new cars are rising 3% per year on average. Maintenance costs on the old car will average $1000 more than the new car. Your savings account earns 4% compounded annually. If you buy the car now, how much do you save in present value terms vs. waiting to buy the car?
4) You currently owe $1400 on your credit card that charges 15% APR compounded monthly. You can pay this off in 12 months or pay it off all at once today. If you pay it off today, how much do you save in present value terms if your savings account earns 2% APR compounded monthly?
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