Question 1 The Federal government creates a new EV investment program where they will provide grants to individuals who buy electric vehicles. The grant will provide $12,500 toward the purchase of a new electric vehicle. If the cost of an electric vehicle is $75,000, calculate how much interest you would save in the first year if you borrowed 100% of the total purchase price assuming that the loan rate is 5.56%. Question 2 You would like to buy a horse that is being currently being sold for $8,500, but you cannot afford it right now. However, you think that you would be able to buy it after 3 years. If the expected inflation rate as applied to the price of this horse is 7% per year, what is its expected price after three years? Question 3 Your bank offers two types of deposit investments, each requiring a deposit of $10,000. The first one pays $11,271.60 after 2 years, and the second one pays $12,139.47 after 3 years. Which one has the higher rate of return? Question 4 Which is the less expensive option for buying a boat, paying $12,500/year at the end of the next five years, or paying $6,250/year at the end of the next ten years? Use an interest rate of 3.25% Question 5 (recommended that you use a spreadsheet for this calculation) You just won $4,200,000 at a casino slot machine. The owners congratulate you and ask you to sign a contract where they pay you the $4,200,000 in an immediate payment today of $200,000 plus 20 equal installments of $200,000 paid at the end of each of the next 12 months (e. in 12 months you get cheque, 12 months later you get another cheque, and on until 20 years is over). Use an interest rate of 3.25%. a. What is the cash value of their offer today? b. What do you need to get for equal payments for the total amount over the time period to be worth $4,200,000? Question 1 The Federal government creates a new EV investment program where they will provide grants to individuals who buy electric vehicles. The grant will provide $12,500 toward the purchase of a new electric vehicle. If the cost of an electric vehicle is $75,000, calculate how much interest you would save in the first year if you borrowed 100% of the total purchase price assuming that the loan rate is 5.56%. Question 2 You would like to buy a horse that is being currently being sold for $8,500, but you cannot afford it right now. However, you think that you would be able to buy it after 3 years. If the expected inflation rate as applied to the price of this horse is 7% per year, what is its expected price after three years? Question 3 Your bank offers two types of deposit investments, each requiring a deposit of $10,000. The first one pays $11,271.60 after 2 years, and the second one pays $12,139.47 after 3 years. Which one has the higher rate of return? Question 4 Which is the less expensive option for buying a boat, paying $12,500/year at the end of the next five years, or paying $6,250/year at the end of the next ten years? Use an interest rate of 3.25%. Question 5 (recommended that you use a spreadsheet for this calculation) You just won $4,200,000 at a casino slot machine. The owners congratulate you and ask you to sign a contract where they pay you the $4,200,000 in an immediate payment today of $200,000 plus 20 equal installments of $200,000 paid at the end of each of the next 12 months (i.e. in 12 months you get cheque, 12 months later you get another cheque, and on until 20 years is over). Use an interest rate of 3.25%. a. What is the cash value of their offer today? b. What do you need to get for equal payments for the total amount over the time period to be worth $4,200,000
