Assignment requirement I

Q$2-1$

A rookie NBA player now is facing his first NBA contract. There are following options for him to consider.

Let's Assume that his opportunity cost is $\backslash (6\backslash \%\backslash ).$ As a financial advisor, which contact would you recommend to your client? Hint: find PV$.$

Q$2-2$

You were given two options to invest.

Option$\backslash$#$1$: Invest in S$\backslash$&P $500$ Index using a lump$-$sum of $\backslash (\backslash$$ $340,000\backslash ).$ The index is expected to provide $\backslash (10\backslash \%\backslash )$ return per year. You expect to invest for the next $10$ years without any contribution.

Option$\backslash$#$2$: Invest in S$\backslash$&P $500$ Index using a the sump$-$sum of $\backslash (\backslash$$ $100,000\backslash ).$ You are expected to contribute in monthly payment of $\backslash (\backslash$$ $2,000\backslash )$ for the next $10$ years. The return is $10\backslash \%$ per year.

Compare these options and explain which option is better and why. Note that both option compound monthly.

Q$2-3$

A client decided to purchase a $\backslash (\backslash$$ $500,000\backslash )$ home. The interest rate that your client will be charged is $\backslash (5\backslash \%\backslash )$ per year. The mortgage is $30$ years.

$1.$ Use amortization table to solve this question.

$2.$ What is the total interest payment that the client is expected to pay over the $30$ years period?

$3.$ If the interest rate went down to $\backslash (4\backslash \%\backslash ),$ would it benefit to your client? Explain.

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