Question
Vikas has just taken out a USD$1,000,000 mortgage at an interest rate of 6% per year. If the mortgage calls for equal monthly payments for
Vikas has just taken out a USD$1,000,000 mortgage at an interest rate of 6% per year. If\ the mortgage calls for equal monthly payments for twenty-five years, what is the\ amount of each payment? (Assume monthly compounding or discounting). Monthly\ rate = 6%/12.\ A. $4,754.70\ B. $5,065.00\ C. $5,179.06\ D. $5,498.01\ E. $6,443.01\ Ans: E\ 1,000,000 = PMT*PVAF(6%/12, 300)\ PMT = $6,443.01\ 5. You are planning on buying an asset that would expect to generate $6000 per year of cash\ flows for the next twenty years. You require a return of 8%. What is the price you will pay\ for this asset?\ A. $58,908.88\ B. $53,342.42\ C. $63,956.26\ D. $52,546.89\ E. $72,219.77\ Ans: A\ PV = 6000*PVAF(20,8%) = $58,908.88\ 6. You have just married and will plan on having one child, expected to be born one year from\ now. You plan to send your first child to the USA for university studies when he/she reaches\ the age of 18. You anticipate requiring $1.5 million to finance his/her education for the four-
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