Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Confusion over Time Value Money problems I am confused with weather or not to divide the interest by 12 (12 months in a year) or

Confusion over Time Value Money problems
I am confused with weather or not to divide the interest by 12 (12 months in a year) or leave it alone because the interest is at a monthly intrest compounded
image text in transcribed
image text in transcribed
I believe I have the wrong present values...
Optional Question: Is Time Value Money (TVM) also known as Discounted Cash Flows Analysis (DCFs) or is that something entirely different?
Optional Question: What methods can help with memorizing: (Or maybe cool*)
A) Present Value Annuity Due
B) Present Value of Ordinary Annuity
C) Future Value is Annuity Due
D) Future Value of Ordinary Annuity
*Maybe like a catchphrase. An example for economics is Supply to the sky and Demand down to the ground because supply is an upward curve and demand is a downward curve.
Note:
A) I am using the adjust calculation method which is divide the interest by the number of payment periods (I/x) and multiplying the years by the number of months (N*x)
B) The problems are all annuities
You have just gone to a car dealer and found the automobile of your dreams. "The salesperson tells you the price of the car is 60 equal monthly payments of a certain amount each with the first payment due today. You know that the car is worth $12,000 and do not want to pay more than that. The salesperson refuses to tell you the actual price of the car though, he will only tell you the payment amount. You get out your trusty (but hopefully not rusty) financial calculator to determine what the price of the car really is. Determine if you should buy the car under each of the following circumstances by calculating the present value of the payments and comparing that to what you believe the car is worth. The payment amount is $199.00 per month and the appropriate discount rate is 4.9 percent nominal compounded monthly A. The payment amount is $249.00 per month and the appropriate discount rate is 6.9 percent nominal compounded monthly. B. , 000.3 C. The payment amount is $299.00 per month and the appropriate discount rate is 6.9 percent nominal compounded monthly.v0e,gle D. The payment amount is $299.00 per month and the appropriate discount rate is 0 percent nominal compounded monthly. 312

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Multinational Business Finance

Authors: David K. Eiteman, Arthur I. Stonehill, Michael H. Moffett

16th Edition

013749601X, 978-0137496013

More Books

Students also viewed these Finance questions