Your parents have told you that they owe $70,000 on loan #1 to the bank. The bank charges 6% compounded semi-annually. Your parents only have to pay the interest on the loan. Payments are made at the end of each month. Your parents also have a high interest loan #2 with the same financial institution. The interest rate on this loan is 18% compounded monthly. Your parents owe $25,000 on this loan. Your parents only need to pay the interest on the loan. Payments are made at the end of each month. Your parents have $130,000 in an account with the financial institution. The account pays no interest. The financial institution has other accounts, with the same risk as the zero interest account, that would pay your parents interest at the rate of 3% per year compounded annually. Questions: What is the amount of the monthly payment on the $70,000 loan? What is the amount of the monthly payment of the $25,000 loan? What is the current value of Family Inc.? As the executive vice president finance of Family Inc. what would you recommend your parents do? Suppose your parents payoff each of the loans. Your parents choose to invest any money left in their savings account in an equity etf. The etf is expected to earn 9% compounded annually. In addition, parents decide to invest $500 per month, at the end of each month in a balanced etf. The balanced etf is expected to earn 7% compounded annually. How much money would your parents have in 30 years? Your parents have told you that they owe $70,000 on loan #1 to the bank. The bank charges 6% compounded semi-annually. Your parents only have to pay the interest on the loan. Payments are made at the end of each month. Your parents also have a high interest loan #2 with the same financial institution. The interest rate on this loan is 18% compounded monthly. Your parents owe $25,000 on this loan. Your parents only need to pay the interest on the loan. Payments are made at the end of each month. Your parents have $130,000 in an account with the financial institution. The account pays no interest. The financial institution has other accounts, with the same risk as the zero interest account, that would pay your parents interest at the rate of 3% per year compounded annually. Questions: What is the amount of the monthly payment on the $70,000 loan? What is the amount of the monthly payment of the $25,000 loan? What is the current value of Family Inc.? As the executive vice president finance of Family Inc. what would you recommend your parents do? Suppose your parents payoff each of the loans. Your parents choose to invest any money left in their savings account in an equity etf. The etf is expected to earn 9% compounded annually. In addition, parents decide to invest $500 per month, at the end of each month in a balanced etf. The balanced etf is expected to earn 7% compounded annually. How much money would your parents have in 30 years
