Question

*FOR THIS HOMEWORK ASSIGNMENT, YOU MUST SHOW ALL WORK (CALCUATIONS) AND DRAW TIME LINES.

5) You want to purchase a condo for $250,000. You have $50,000 to put down and you will take out a 20 year mortgage at 4% interest. What is your monthly mortgage payment?

6) After taking a finance course, you are serious about developing a MONTHLY plan to save and invest. You are 22 years old and want to retire at 62 years old with 1.5 million dollars. How much do you have to save on a monthly basis if your interest rate is steady at 7%?

7) Jenny has a $5000 balance on her credit card that charges 18% interest, however, each month she gets her credit bill and there is an interest charge. Why is this happening?

8) John buys a corporate bond that pays 15%, pays interest twice per year, and matures in 20 years. How many compounding periods are there?

9) Jose decides to open a restaurant. After analyzing costs and forecasting revenue he realizes he can earn about a 14% return on his investment. What factors must Jose think about in making his decision?

10) Justin has saved 50,000. He can invest it in a real estate venture that will pay 15% for 10 years, and then in a mutual fund for an additional 10 years at a 9.75 annual return. He's hoping that in 20 years, when he is 40, he will have enough money to pay for his child's college education, estimated at about $75000 per year. Will he have enough?

11) Microsoft Corporation decides to invest in developing a robot that will help the elderly with tasks such as putting on socks, eating, etc. The initial investment for this project is $52,000,000 (52M). The cash flows expected from this investment are 28 million in year 1, 19 million in year 2, 23 million in year 3 and 18 million in year 4. What is the Net Present Value of this project? Would this project be a good investment? Or would it be better to invest $52M in a bond paying 8% annually?

Answer 1

QUESTION 5