a. If you save $200 per month for 10 years at 12% annual percentage rate with monthly
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Question:
- a. If you save $200 per month for 10 years at 12% annual percentage rate with monthly compounding,
- what is the future value annuity factor? (1 mark)
- what is the future value? (1 mark)
- Suppose that you have a choice between receiving $10,000 now and receiving $1000 per month for the next 12 months. Assuming that you can invest at a 12% annual percentage rate (APR) with monthly compounding, what is
- the present value annuity factor? (1 mark)
- the present value? (1 mark)
- your choice? (1 mark)
- the break-even annual rate of return at which you are indifferent between receiving $10,000 now and receiving $1000 per month for 12 months?
(2 marks) - the break-even number of monthly payments at which you are indifferent between receiving $10,000 now and receiving $1000 per month, given an APR of 12% with monthly compounding? (1 mark)
- the break-even dollar amount of monthly payments, given an APR of 12% with monthly compounding and 12 months of payments? (1 mark)
(Hint: Use the financial calculator for parts (iv), (v), and (vi). Clearly show the inputs you use for each calculation.)
- You are saving $200 per month at 6% annual percentage return (APR) with monthly compounding. How many years will it take for your savings to accumulate to $10,000? (Hint: Use the financial calculator for this calculation, and clearly show the inputs you use.) (2 marks)
- You are saving $200 per month. What annual percentage rate of return must be earned for your savings to accumulate to $30,000 in 10 years? (2 marks)
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