Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

URGENT!!! Please show which formula is being used for the question. Thank you (a) You are going to pay off a car loan with payments

URGENT!!!

Please show which formula is being used for the question. Thank you

  1. (a) You are going to pay off a car loan with payments of $500 every quarter for the first year and $1,000 every quarter during the second and third years. The return-guarantee investment account from which you make the loan repayments earns a quarterly rate of return of 4% and the first payment begins in three months.

    1. i) How much will the account balance increase three years from now if you do not have to make any of the repayments? (10 marks)

    2. ii) What is the minimum amount you need to have in the investment account today in order to make all the repayments? (4 marks)

  2. (b) How much should you pay to buy an asset today that will pay you $5,000 every month ,with the first payment eight months from now and the last payment 3 years from now? The relevant discount rate is 2% every month. (6 marks)

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Investments An Introduction

Authors: Herbert B Mayo

9th Edition

324561385, 978-0324561388

More Books

Students also viewed these Finance questions