Question # 2

a)If you deposit $20,000 in a bank account paying 5.38%, how much will you have in one year? If you need $24,000 in one year, how much do you have to deposit today?

b)You plan to live very well when you retire in thirty-five years and have calculated that you will require $3,000,000 at that time.If the rate of interest available is 9%, how much do you need to invest today in order to live comfortable during your retirement?What if rates are only 4.5%?

c) As a recently- graduated finance major embarking on a career in investment banking, you naturally must own aBenz immediately.The car cost $56,640.You also must spend $6,496 on blue pin-stripe suits.Your salary this year is $84,000, and next year it will be $92,000.Your routine living expenses this year will be $68,000.You plan to make up the difference between current income and current consumption by getting a loan at a rate of 14%.You intend to repay the loan, plus interest, in one year.How much will you have left to spend next year?