Question
P.1) If you borrow $2,000 now and must repay the If you borrow $2,000 now and must repay the loan plus interest (at rate of
P.1) If you borrow $2,000 now and must repay the If you borrow $2,000 now and must repay the loan plus interest (at rate of 6% per year) after five loan plus interest (at rate of 6% per year) after five years. Draw the cash flow diagram. What is the total years. Draw the cash flow diagram. What is the total amount you must pay?
P.2) : If you start now and make five deposits of If you start now and make five deposits of $1,000 per year (A) in a 7% per year account, how $1,000 per year (A) in a 7% per year account, how much money will be accumulated immediately after much money will be accumulated immediately after you have made the last deposit. Draw the cash flow you have made the last deposit. Draw the cash flow diagram. What is the total amount you will diagram. What is the total amount you will accumulate?
P.3) Assume that you want to deposit an amount (P) Assume that you want to deposit an amount (P) into an account two years from now in order to be able to into an account two years from now in order to be able to withdraw $400 per year for five years starting three years withdraw $400 per year for five years starting three years from now. Assume that the interest rate is 5.5% per year. from now. Assume that the interest rate is 5.5% per year. Construct the cash flow diagram. Construct the cash flow diagram.
P.4) Suppose that you want to make a deposit into your Suppose that you want to make a deposit into your account now such that you can withdraw an equal amount account now such that you can withdraw an equal amount (A1) of $200 per year for the first five years starting one (A1) of $200 per year for the first five years starting one year after your deposit and a different annual amount (A2) year after your deposit and a different annual amount (A2) of $300 per year for the following three years. With an of $300 per year for the following three years. With an interest rate (i) of 4.5% per year, construct the cash flow interest rate (i) of 4.5% per year, construct the cash flow diagram. diagram.
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