FINC 3301 ASSIGNMENT 2 PART 1 TVM Problems 1. Colin has just inherited $6,000. He would like to use this money to buy his mom Hayley a new scooter costing $7,000 two years from now. If he deposits his money in an account paying 8 percent compounded semi-annually? How much will he have at the end of the two year period? Will Colin have enough money to buy the gift? Enter answer here >329>> Use this space to calculate your answers in each problem, then enter the answers in the yellow boxes on the right Yes or No>>>>>>>>>>>>> > PV RATE PM INPER FV Formula here > 2. How long would it take for you to save $1,000,000 if you deposit $40,000 per year into an account beginning today that pays 12 percent? Enter answer here > >>>> > Enter answers below 3. Find the present value of the following stream of cash flows, assuming that the firm's opportunity cost is 12 percent. What would be the future value of those cash flows? Hint: PV Here you can either calcualte the PV one by one and then OR you can calculate the NPV. In both cases, the second step is jsut to take that (combined) PV to a FV of four years. FV Year Amount $10,000 35,000 B W N M 24,000 53,000ZOOM 4. A wealthy industrialist wishes to establish a $2,000,000 trust fund which will provide income for his grandchild into perpetuity. He stipulates in the trust agreement that the principal may not be distributed. The grandchild may only receive the interest earned. If the interest rate earned on the trust is expected to be at least 7 percent in all future periods, how much income will the grandchild receive each year? Enter answer here > > > > >> 5. Nico is 30 years old and will retire at age 65. He will receive retirement benefits but the benefits are not go. nough to make a comfortable retirement life for him. Nico has estimated that an additional $25,000 a year over his retirement benefits will allow him to have a satisfactory life. How much should Nico deposit today in an account paying 6 percent interest to meet his goal? Assume Nico will have 15 years of retirement Enter answer here >> >>>> 6. Marc has purchased a new car for $15,000. He paid $2,500 as down payment and he paid the balance by a loan from his hometown bank. The loan is to be paid on a monthly basis Enter answer here > > > >> > for two years charging 12 percent interest. How much are the monthly payments? 7. Jia has just won a $20 million lottery, which will pay her $1 million at the end of each year for 20 years. An investor has offered her $10 million for this annuity. She estimates that she can earn 10 percent interest, compounded annually, on any amounts she invests. She asks your advice on whether to accept or reject the offer. What will you tell her? (Ignore Enter answer here >> >>> > Taxes)O ZOOM continuously? 8. How much would Sophie have in her account at the end of 10 years if she deposits $2,000 into the account today earning 8 percent interest and interest is compounded Enter answer here >>>>>> 14:4 PART 2 TVM Problems Enter answers here >>?>>> 9. Amortization Table. You wish to buy a $40,000 car. The bank can finance you with a 3-year loan at a 4 percent APR. If you make a $7,000 down payment on the purchase, A) b What are the monthly payments on your loan? B) How much will you pay in interest each year? C) How much of your second payment goes to the principal Show the amortization table (use monthly payments). Show Table to the right-> 10. You just purchased a $400,000 house and gave a 20% down payment For the remaining portion, you obtained a 30-year mortgage at a 6% interest rate. A) Enter answers here What are the monthly payments on this mortgage? B) If the house appreciates at a 3 percent annually, what will be the value of the house in ten years? C) In ten years, how much equity will you have on this home? C 11. You have turned 35 years old and have recently switched to a new job. You have $70,000 in the retirement plan from your former employer. You will roll that money into the retirement plan of the new employer. In addition, you will contribute $8,000 each year into your new employer's plan. If the rolled over money and the new contributions both earn an Enter answers here >> > > >> 8 percent return, how much money would you expect to have when you retire in 28 years? How much can you afford to withdraw monthly for the subsequent 25 years after you retire? That would be for the age of 63 until 88 years old12 You have become a financial advisor and a new client has received a trust fund currently worth $500,000. However, she will not have access to the fund until she turns 60 years old, which is in 20 years. At that time she can withdraw $10,000 per month. If the trust fund is invested at a 6 percent rate, compounded monthly, how many months will it last your Enter answer here >>> >>> client once he starts to withdraw the money