# Jos Lpez has $15,000 in a 6-year certificate of deposit (CD) that pays a guaranteed annual rate

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## Question:

2. Oliver López deposits $12,000 in a bank account that pays 7% annual interest. He calculates the account balance after 5 years. (4 points)

3. Carmen Hernández has saved $8,000 for a car deposit. The highest monthly payment she can pay is $455. The loan will have an APR of 11% payable at the end of each month. Determine what is the most expensive car you can buy if you buy it on credit payable over 60 months. (6 points) 4. Determine the present value of a financial instrument that pays $18,500 in 10 years if instruments of similar risk pay 6% annually. (4 points) 5. Calculate the future value (FV) of a $5,000 investment at an interest rate of 10% for 7 years. (Value: 4 points) 6. Determine the interest rate you will pay if you are approved for a loan for $112,000 with annual payments of $15,000 for 8 years. (4 points) B. Problems (Value: 34 points) 7. Reynaldo Seplveda retires in 20 years and currently has savings of $125,000. Reynaldo thinks he will need $650,000 at the beginning of his retirement and has no additional funds saved. He determines the annual interest rate he will need to meet his goal. (6 points) 8. Suppose you want to purchase heavy equipment machinery and a commercial bank will lend you $65,000 for the transaction. The loan will be amortized over 5 years and the nominal interest rate will be 8% payable monthly. Calculate the monthly payment and annual rate (EAR) of the loan to be amortized. (6 points) 9. Master Paint Industries' sales in 2019 were $18 million, while in 2017 they were $10 million. Determine the sales growth rate. (4 points) 10. Determine the present value of a $3,500 perpetuity if the interest rate is 7%. If interest rates doubled to 14%, calculate the present value. (6 points) 11. Calculate the future value of an ordinary annuity that pays $2,350 at 6% for 6 years. It also determines the future value if this were a prepaid annuity. (6 points) 12. Mr. Del Valle is 54 years old and plans to retire in 8 years. He wants to live at least 20 years after he retires. He has $125,000 in savings and expects to earn 7% annual interest.He hopes to have an income of $45,000, the same amount he currently receives for the work he does. Del Valle will begin receiving your benefit after 8 years biweekly (24 payments per year) after you retire. Annual inflation is expected to reach 5%. Determine how much Mr. Del Valle must save over the next 8 years to meet his retirement goal. (6 points)