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My wife wants to buy a new Volvo XC90 to haul around our two kids and two cats. A 2020 model costs $65,000 (including taxes
- My wife wants to buy a new Volvo XC90 to haul around our two kids and two cats. A 2020 model costs $65,000 (including taxes and tag). A used 2017 Volvo XC90 costs $45,000. Assume an interest rate of 2.6% and that the entire amount is financed.
- What will be our monthly payment on the new model if we take out a 4 year loan? (8 points)
- What will be the monthly payment on the used model if we take out a 4 year loan? (8 points)
- If we save the difference between (a) and (b) each month for four years and earn a stated annual rate of 8%, how much money will we have at the end of 4 years? (4 points)
- Crow Valley offers an 8 percent coupon bond with semiannual payments and a yield to maturity of 10 percent. The bond matures in 20 years, and the face value is $1,000.
- What is the market price per bond if the face value is $1,000? (10 points)
- Is this a discount or premium bond? (5 points)
- You would like to give your son $500,000 towards his college education 16 years from now. How much money must you set aside today for this purpose if you can earn 8 percent on your investments? (10 points)
- On your fifteenth birthday, you received $5,000 which you invested at 8 percent interest, compounded annually. Your investment is now worth $10,500. How old are you today (round to the nearest year)? (10 points)
- Ashley expects to receive cash flows of $200, $600, $600, and ($200) at the end of each periodover the next 4 years, respectively. Assuming a 6 percent discount rate, what is the present value of these cash flows? (10 points)
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