Assignment 2: Quantitative Exercises and Final Project 1: Amortization

Part One: Quantitative Exercises

1. Determine the present value solutions to period, interest, and payments.
2. Calculate the future value solutions for period, interest, and payments.
3. Determine the answers relating to annuity, perpetuities, and annuity due problems.

Download the Week 2 quantitative exercises called FIN2030_W2_A2_Template.xlsx.

Complete the assignment using this template. You may use the formulas in Microsoft Excel and/or a financial calculator. Be sure to summarize your results with embedded formulas in the spreadsheet, using the mathematical equations, or the steps taken on the financial calculator.

Templete:

Introduction to Finance FIN2030
Week 2, Assignment 2
Part One: Quantitative Exercises
Questions	Answers
1. Future Value. What is the future value of
a. $800 invested for 14 years at 11 percent compounded annually?
b. $210 invested for 8 years at 9 percent compounded annually?
c. $650 invested for 12 years at 8 percent compounded annually?
2. Present Value. What is the present value of
a. $803 to be received 18 years from now at a 10 percent discount rate?
b. $406 to be received 7 years from now at a 5 percent discount rate?
c. $400 to be received 10 years from now at a 9 percent discount rate?
3. Future Value of an Annuity. What is the future value of
a. $557 a year for 12 years at 5 percent compounded annually?
b. $748 a year for 9 years at 12 percent compounded annually?
c. $442 a year for 7 years at 11 percent compounded annually?
4. Present Value of an Annuity. What is the present value of
a. $1,163 a year for 12 years at an 7 percent discount rate?
b. $329 a year for 6years at a 12 percent discount rate?
c. $365 a year for 20 years at a 14 percent discount rate?
5. How many years will it take to grow
a. $765 to a value of 2,028.19 at a compound rate of 14 percent?
b. $321 to a value of 450.22 at a compound rate of 12 percent?
c. $881 to a value of 1,305.78 at a compound rate of 7 percent?
6. Interest Rate. At what interest rate will it take to grow
a. $800to a value of 1,017.13 over 6 years?
b. $600 to a value of 1,082.08 over 5 years?
c. $401 to a value of 1,311.16 over 6 years?
7. Car Loans (Hint: P/Y=12). How much is a car loan with a payment of
a. $453 per month for 3 years at 6% interest per year?
b. $466 per month for 5 years at 15% interest per year?
c. $301 per month for 6 years at 7% interest per year?
8. Mortgages (Hint: P/Y=12).
What was the initial mortgage on the house?
a. $4,369.66 per month for 30 years at 8 percent interest?
b. $1,626.83 per month for 15 years at 4 percent interest?
c. $3,724.21 per month for 30 years at 18 percent interest?
9. Mortgages (Hint: P/Y=12). What is the payoff on a 30 year, 6% mortgage of
a. $255,413 with a payment of 1,321.33 with 8 years remaining?
b. $530,493 with a payment of 3,180.57 with 12 years remaining?
c. $297,266 with a payment of 1,782.26 with 11 years remaining?

Part Two: Final Project 1: Amortization

The final project involves applications in personal finance, as follows:

• Week 2: Amortization
• Week 3: Portfolio Analysis
• Week 4: Government Securities
• Week 5: Portfolio Return and Risk

Also in Week 5, you will prepare a report and presentation that summarize all of your work.

Scenario for Week 2: Amortization

The scenario is designed to help you determine and evaluate the payment amount of a car loan and a mortgage, based on the assumption that your household income is $36,000 per year or $3,000 per month.

Based on your income, you may spend 28% of your monthly income on housing, and 10% on a car loan. You are to put a 3% down payment on the house and a 10% down payment on the car.

Required:

Using Microsoft Excel, address the following issues:

1. What is the maximum car payment and mortgage payment you can afford with the following conditions: your monthly household income, 10% for the car payment, and 28% for the mortgage payments?
2. Assume a 10% down payment on the car and a 3% down payment on the house. Also, assume that you can get financing for the car at 7% for 60 months, and the house can be financed at 5% for 30 years. How much could you spend on the car and the house? You must submit your calculations in a Microsoft Excel document showing how answers were reached.
3. Create a complete amortization schedule for the car, using the information in questions 1 and 2.
4. Discuss the distributions of principal, interest and the balance over the life of the loan.