Assume you are planning to invest $200 each year for four years and will earn 8 percent per year. Determine the future value of this annuity due problem if your first $200 is invested now.
Using the PVIFA table (table 9.4 in the textbook), determine the annual payment on a $600,000, 10 percent, business loan from a commercial bank that is to be amortized over a five-year period.
Assume a $1,000 face value bond has a coupon rate of 9.5% paid semiannually and has an eight-year life. If investors are willing to accept a 12 percent rate of return on bonds of similar quality, what is the present value or worth of this bond?
Use a financial calculator or computer software program to answer the following questions:
- What is the present value of $450,000 that is to be received at the end of 20 years if the discount rate is 10%?
- How would your answer change in (a.) if the $450,000 is to be received at the end of 15 years?
You are considering borrowing $200,000 to purchase a new home.
- Calculate the monthly payment needed to amortize a 7% fixed-rate 30-year mortgage loan.
- Calculate the monthly amortization payment if the loan in (a.) was for 15 years.