Question
The local motorcycle dealership has a sale to clear out its inventory from last years models. The dealership has two options for you: Option 1:
The local motorcycle dealership has a sale to clear out its inventory from last years models. The dealership has two options for you: Option 1: $35,000 (price) with 0% interest financing for six years, with equal monthly payments at the beginning of the month. At the end of six years you fully pay off the motorcycle. This option is only available if you finance the purchase through the dealership. Option 2: $3,500 cash back if you pay for the motorcycle fully upfront immediately. Suppose you are looking for a bank loan to take advantage of option 2 and want the loan to be six years long with beginning of month payments. What is the monthly interest rate that will make options 1 and 2 equal? [Hint, what is the interest rate that will make the monthly payments for both options the same.] Question 3 (3 marks): Jenny currently has $70,000 saved up in her savings account. She would like her savings to be $500,000 when she retires in 20 years. She would like to make equal monthly deposits into her savings account to achieve her goal. How much does she need to deposit at the end of each month from now until she starts her retirement? Her savings account pays 6.7% p.a. compounded quarterly.
The local motorcycle dealership has a sale to clear out its inventory from last years models. The dealership has two options for you: Option 1: $35,000 (price) with 0% interest financing for six years, with equal monthly payments at the beginning of the month. At the end of six years you fully pay off the motorcycle. This option is only available if you finance the purchase through the dealership. Option 2: $3,500 cash back if you pay for the motorcycle fully upfront immediately. Suppose you are looking for a bank loan to take advantage of option 2 and want the loan to be six years long with beginning of month payments. What is the monthly interest rate that will make options 1 and 2 equal? [Hint, what is the interest rate that will make the monthly payments for both options the same.] Question 3 (3 marks): Jenny currently has $70,000 saved up in her savings account. She would like her savings to be $500,000 when she retires in 20 years. She would like to make equal monthly deposits into her savings account to achieve her goal. How much does she need to deposit at the end of each month from now until she starts her retirement? Her savings account pays 6.7% p.a. compounded quarterly.
Question 4 (3 marks): There is an investment annuity that pays 5.5% compounded quarterly. The investment makes payments at the end of each quarter for 10 years. a. What is the size of each quarterly payment. b. Calculate the principal portion of the 50th payment. c. Calculate the interest portion of the 60th payment.
Question 5 (5 marks): You want to start saving for retirement by opening an RRSP account. You have no savings yet but thats okay because you are still young. You plan to retire in 30 years. Upon retirement, you would like to be able to spend $120,000 a year for 20 years. You fund this spending by making beginning of month withdrawals that are the same amount (size) every month. The first withdrawal occurs once you begin your retirement in 30 years. The last withdrawal occurs at the beginning of the last month of your retirement horizon. How much do you need to deposit at the end of each month for the next 30 years in order to achieve your retirement objective? Your RRSP account pays 7.7% p.a. compounded semi-annually during both savings and retirement periods.
please help me! answers to these questions will be life saving for me!!
thank you sooo much!
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access with AI-Powered Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started