Question

1. You make two separate deposits in a bank. The first amount of $1,200 deposited today earns a 6% interest per year for 10 years, and the second amount of $800 to be deposited two years from now would earn a 5% interest per year for the next 8 years. What would be your total future value at the end of year 10?

2. What is the future value of an annuity payment of $1250 over 5 years if interest rates are 5 percent? Assume that the first payment for the annuity starts 5 years from now. (Hint: you need to compute FV at the end of year 10)

3. You wish to buy a $30,000 car. The dealer offers you a 3-year loan with a 4.8 percent APR. What are the monthly payments (PMT)? How much of the 2^nd payment is interest payment?

4. You are looking to buy a car. You can afford $500 in monthly payments for three years. In addition to the loan, you can make a $1000 down payment. If interest rates are 6 percent per year (APR), what price of a car can you afford? (Hint: Find the loan value (PV) of the monthly payments and add the down payment.)

Answer 1

Please note i have answered first question and it subparts as per polocy. Please feel free to ask if have doubts. Thanks.