Q 2

1. You have just commenced your Business degree and your father has promised an allowance of $6,000 per annum starting from today, the final payment being made eight years from today. The applicable interest rate is 8% p.a. What is the present value of the expected payments?

2. On second thoughts your father considers paying you a quarterly allowance of $3,000 for a period of nine years, payable at the end of each quarter. You plan to invest the moneys received with a bank, and use the accumulated amount as an initial advance to purchase a dream vehicle of yours.

Your bank gives you two different investment schemes (i) a nominal rate of 8% p.a. compounded monthly and (ii) a nominal rate of 8.2% compounded quarterly

1. Determine which of the two investment schemes, is the better option, and explain why?

2. With the chosen option as the nominal rate, how much do you estimate to have at the end of your nine year period.

3. What interest rate would make you indifferent to the two investment schemes offered?

3. At the end of nine years, you decide to use the accumulated amount calculated in part b) II. to buy your dream vehicle, as the initial advance. If the cost of the proposed vehicle was $875,000 what quarterly repayment would you need to make if you took a loan of 15 years, at an interest rate of 5% compounded quarterly.

Can I get a written answer for this(on paper if possible) NOT excel please and include the relevant equations for each question as well.

This was all the information given in the question.

A quick response would be greatly appreciated! Thank you so much! <3