Question

The Marco family — comprising Mrs. Marco aged 40, Mr. Marco, aged 3 9 , and their three young children — relocated to Barcelona in January 2020 when Mrs. Marco received a job offer from a n international firm . They rented a three - bedroom condominium in Barcelona for 2. 1 00€ per month, which included parking and fees.

While renting made life easy, the Marc o family began weighing the pros and cons of purchasing a flat, in the same building, that became available in June 2020. The idea of home ownership as a form of long - term investment appealed to the couple. The preliminary rental payments could be used for mortgage payments instead.

While searching f or the right property they found a nice apartment at one of the best locations of the city. The apartment was owned and had been promoted by a state - owned construction company and was offering two alternatives:

Option I : renting the apartment with a perpet ual contract, meaning forever.

The family was very happy living in that area, and they had the chance to live there forever at an offered price of 1 , 6 5 0 EUR the first month, and the rent price will be growing by a 0.1 25 % monthly. This option would prevent the Marco family from applying for a loan, which represented a heavy burden off the family’ budget .

Option II : consisted in acquiring the property with a mo rtgage scheme for 35 years. The total price of the apartment is 8 75 .000€. The family can pay an initial down payment of 2 75 , 000 EUR and the rest (600 ,000 EUR ) to be paid in constant monthly payments with an annual interest rate of a 2. 75 % compounded monthl y.

Mrs. Marc establishes the maximum amount they can pay monthly as 2. 25 0€.

- In case of taking option I , what is the amount of the monthly payment the Marco family should pay in 35 years (in month 4 2 0) ?

( only the amount to be paid that month , s how the calcu lations )

- In case of taking option I , how much money will have the Marco family paid in total after 35 years?

- If the Marcon family decides to leave Barcelona in 10 years, to attend a better offer elsewhere, what is the present value of the rental contract o ffered by the owner as option I ? ( consider 2. 75 % compounded monthly as the interest/discount rate)

- If Mrs. Marco decides to buy the apartment, and accepts Option II , what will be the amount of each monthly payment to be done during the next 35 years?

- Mrs. Marco believes that, if she takes option II and acquires the flat, she might be interested in selling the apartment in 35 years’ time. If she wants to recover a ll the money invested (initial payments plus all monthly payments done), what will be the p rice she will ask for that apartment at that moment?

- Mrs. Marco is happy for knowing how to calculate future values and present values, because this helps in taking financial d ecisions. S he wonders what the future value of the flat will be in 35 years, if the interest rate for this type of operations is an a nnual 1. 7 5% (comp. monthly). Find the Future Value of that apartment in 35 years.

- The Marco family thinks that the monthly payments they’ll have to afford during the nex t thirty five years are too much, and believe s the seller could be convinced about maki ng constant payments only once per year, at the end of each year. The interest rate would still be the same 2. 75 % (but now that would be compounded yearly instead of monthly) . What is the amount of the yearly payment to be done?

I need Questions1-2-3

Answer #1

Question 1:

First month installement = 1650 Eur

Interest = 0.125% monthly

Time 35 years i.e 420 in months

The future value is given by

FV = PV * (1+r)^n

1650* (1+0.125%)^420

= 2788.34

Question 2:

P = 1650

r = 0.125%

n =420

= 1650*((1+.125%)-1)/0.125% = **910,674.23**

**Question 3:**

P = 1650

r= 2.75%

n = 12*10 =120

Substituting the formula we get **PV as
57,686.17**

The Marco family—comprising Mrs. Marco aged 40, Mr. Marco, aged
39, and their three young children— relocated to Barcelona in
January 2020 when Mrs. Marco received a job offer from an
international firm. They rented a three-bedroom condominium in
Barcelona for 2.100€ per month, which included parking and
fees.
While renting made life easy, the Marco family began weighing
the pros and cons of purchasing a flat, in the same building, that
became available in June 2020. The idea of...

The Andreotti family—comprising Mrs. Andreotti, aged 40, Mr.
Andreotti, aged 38, and their three young children— relocated to
Barcelona in 2020 when Mrs. Andreotti received a job offer from a
leading investment banking giant. For the next six years, they
rented a three-bedroom condominium for 2.000€ in Barcelona per
month, which included parking and condominium fees.
While renting made life easy, the Andreotti family began
weighing the pros and cons of purchasing a flat, in the same
building, that became...

The Andreotti family—comprising Mr. Andreotti, aged 40, Mrs.
Andreotti, aged 38, and their three young children— relocated to
Barcelona in 2020 when Mr. Andreotti received a job offer from a
leading investment banking giant. For the next six years, they
rented a three-bedroom condominium for 2.000€ in Barcelona per
month, which included parking and condominium fees. While renting
made life easy, the Andreotti family began weighing the pros and
cons of purchasing a flat, in the same building, that became...

The Andreotti family—comprising Mr. Andreotti, aged 40, Mrs.
Andreotti, aged 38, and their three young children— relocated to
Barcelona in 2020 when Mr. Andreotti received a job offer from a
leading investment banking giant. For the next six years, they
rented a three-bedroom condominium for 2.000€ in Barcelona per
month, which included parking and condominium fees. While renting
made life easy, the Andreotti family began weighing the pros and
cons of purchasing a flat, in the same building, that became...

The apartment was owned and had been
promoted by a state-owned construction company and was offering two
alternatives:
Option A: renting the
apartment with a perpetual contract, meaning forever. The Marconi
family thought that could be a good solution for them.
The family was very happy living in
that area, and they had the chance to live there forever at an
offered price of 1.600€ the first month, and the rent price will be
growing by a 0.1% monthly.
At...

3. Laurie has been renting an apartment for a few years and is
considering buying a house. Her gross annual income is $48 000.
Laurie finds a house she likes, with a cost of $145 000. She has
saved up enough money to cover the closing costs plus an additional
$25 000 for a down-payment.
b) The mortgage is amortized over 25 years, with an interest
rate of 7.25% /a, compounded semi-annually. Use the TVM Solver to
determine Laurie’s monthly...

Question A2
(a) Mrs Wong changes employers at age 46. She’s given RM8500 as her
vested benefits in the company’s pension plans. She invests this
money in a registered retirement savings plan paying 8% annual
interest, and leaves it there until her ultimate retirement at age
60. She plans 25 annual withdrawals from this fund, the first on
her 61st birthday. Find the size of these withdrawals.
(b) A parcel of land valued at $35,000 is sold for a down...

Time Value of Money in Personal Finance
Mr. Haris, 32 years and Mrs Tini aged 30 years has
been married for 5
years now. They have two kids, Arif age 4 and Amira, 1
year. The spouse
is planning to send their kids to further their study
to a local university
after completing tertiary education at the age of 18.
Taking into
consideration the inflation rate, education cost for
the next 14 years is
estimated to be amounting RM90,000 which...

I was looking at the solution to the following question on this
site. I could not understand why use 12 when working out the NPER.
Since the monthly payments start 1 month after should you not use
11?
Question 3. (a) A family member is thinking about
funding his granddaughter’s university education in 8 years when
she is expected to enrol at UWI, St. Augustine. He opens a special
savings account, where he can receive a lump sum in 8...

Maths of finance
This task assesses the following learning
outcomes:
Time value for money and the rate of return
Assess the simple interest and compound interest
Net Present value in Capital Budgeting (Internal rate of
return, Payback period)
Annuities (PV, FV, Growth Annuities, types of Annuities)
Perpetuities (PV, Growth Perpetuities)
2. The bank offers you some options, however, you can't withdraw
it for 5 years:
a. 8% simple interest
b. 6% compounded semiannual
c. 5.5% compounded monthly Which is the...

ADVERTISEMENT

Get Answers For Free

Most questions answered within 1 hours.

ADVERTISEMENT

asked 17 minutes ago

asked 23 minutes ago

asked 30 minutes ago

asked 30 minutes ago

asked 44 minutes ago

asked 46 minutes ago

asked 47 minutes ago

asked 57 minutes ago

asked 1 hour ago

asked 1 hour ago

asked 1 hour ago

asked 1 hour ago