Introduction to Finance

You are saving for a new house, and you put $10,000 per year in an account paying 8%. The first payment is made today. How much will you have at the end of 3 years?

Question 2 :

Mr. James are ready to buy a house and he allocate his money which is amount RM 20,000 for a down payment and closing costs. Closing costs are estimated to be 4% of the loan value. His annual salary amount was RM 36,000. The bank is willing to allow his monthly mortgage payment to be equal to 28% of Mr. James’s monthly income. The interest rate on the loan is 6% per year with monthly compounding (.5% per month) for a 30-year fixed rate loan.

a.    How much money will the bank loan for Mr. James?

b.   How much can Mr. James offer for the house?

Question 3 :

You are offered an investment that will pay you RM200 in year 1, RM400 the next year, RM600 the following year, and RM800 at the end of the 4th year. You can earn 12% on similar investments. What is the most you should pay for this one?

Question 4 :

How much money will you accumulate by the end of year 10 if you deposit $3,000 each for the next ten years in a savings account that earns 5% per year?

Question 5 :

Suppose you would like to have $25,000 saved 6 years from now to pay towards your down payment on a new house. If you are going to make equal annual end-of-year payments to an investment account that pays 7%, how big do these annual payments need to be?

Question 6 :

How much must you deposit in a savings account earning 8% interest to accumulate $5,000 at the end of 10 years?

Question 7 :

If you can earn 12% on your investments, and you would like to accumulate $100,000 for your child’s education at the end of 18 years, how much must you invest annually to reach your goal?

Question 8 :

What is the present value of an annuity of $10,000 to be received at the end of each year for 10 years given a 10 percent discount rate?

Question 9 :

What is the present value of $600 perpetuity at 7% discount rate?

Question 10 :

How much money will be in an account in 5 years if $10,000 is deposited now at an interest rate of 1% per month? Use three different interest rates: (a) monthly, (b) quarterly, and (c) yearly.