1. Eleanor Rigby is planning to start a business. She will need to purchase equipment that costs $40,000. She can borrow the money but will have to make annual payments of principal and interest. a. Compute the annual payment Eleanor will be required to make on a $40,000, 5-year, 7 percent loan.

b. If Eleanor can afford to make annual payments of $11,000, how much can she borrow?

2. Mary wants to start saving for her dream home. She expects the house she will want to cost $200,000. She hopes to be able to purchase the house for cash in 10 years.

a. How much will Mary have to invest each year to purchase her dream home at the end of 10 years? Assume an interest rate of 8 percent.

b. Mary's parents want to give her a substantial gift for the purchase of her home. How much must her parents give her if she is to reach the desired amount of $200,000 in 12 years? Assume Mary will invest the gift from her parents at an interest rate of 8 percent (and that she will not add to it).

3. George is 25 and would like to retire with at least $1M at the age of 65. He believes he can earn an annual return of 5% on his investment and that he can afford to invest $10,000 per year. He has no retirement savings currently. If George follow his plan, how much will he have saved for retirement at age 65?

Answer rating: 100% (QA)

Answer Solution 1 Annual payment Eleanor will require to Pay 9756 b Amount she borrow 6... View the full answer