Time value analysis has many applications including retirement planning, stock and bond valuation, loan amortization, and capital budgeting analysis. Time value of money uses the concept of compound interest rather than simple interest. Exampleinputs and work

E1. How much money do I need in an 4.5% annual account today so that I have at least $1,000 in savings in 3 years?

The inputs include:

PV= solving forwhat should be deposited to get to $1000 in 3 years

FV= $1,000

PMT= 0

I/Y= 4.5%

N= 3

Work:

1000 = x(1 .045)^3

1000 = 1.045^3x

1000= 1.1412x

1000/1.1412= x

X= 876.27

1. You are offered an investment opportunity with the "guarantee" that your investment will double in 25 years. Assuming annual compounding, what annual rate of return would this investment provide?

2. If you would like to accumulate $14,795 over the next 6 years, how much must you deposit each six months, given a 7.5% interest rate and semiannual compounding?

3. Malcolm wants a new car to drive for his job at Dollar Tree. If he took out a car loan, what would his loan payments be?

a. Malcolm is going to buy a 2022 Camry. The sticker price is $19,850. He plans to make monthly payments at 5% annual interest for 5 years. Identify the monthly payment.

4. Malcolm has now graduated, received a job offer, and has his sights set on a sports car. The car's sticker price is $60,000. He receives $8,000 on his trade-in and he qualifies for a 3.95%, 7-year loan. a. Identify the monthly payment

5. Malcolm has realized that he needs to focus on his future, and he opens a retirement account with his firm. Each pay period (2 per month) he deposits $275 into an account that earns 8% annually. After 35 years, how much will be in Malcolm's retirement account, if he continues making the same deposit?

6. Malcolm took a trip to Jamaica over Thanksgiving break and rang up a $3500 credit bill. The minimum payment on the bill is $150 at 25% APR. a. Identify the Effective Annual Rate (EAR). b. Identify how long it will take to pay off the $3500 if he only makes the monthly payment.

7. At the age of 65, Malcolm has saved $1,500,000. He has decided to take monthly payments for the next 20 years from this account, which is averaging 9% annual interest. What is the value of his monthly payment?

8. Show an Amortization schedule. How much student debt will I bear by the time I graduate? What will my student loan payments be? a. My undergraduate student debt is $32,500. I have secured a 4.08% annual rate (EAR) for a 25-year loan, identify the monthly payment. b. What is the total amount of interest paid on this loan? c. In total (interest plus principle) how much did you pay for this $32,500 loan?

Answer rating: 100% (QA)

1 To find the annual rate of return for an investment that doubles in 25 years we can use the formul... View the full answer