Documente Academic
Documente Profesional
Documente Cultură
interest you would pay on this amount. Assuming no penalty charges when
monthly interest rate advertised is 2.49% or annual 29.88%
12. Joe is getting ready to buy a car. He has $20,000 in investments earning 4.9%
annually. The car also costs $20,000. If he doesn't pay cash for the car, Joe can
get a loan at 2.9% interest for 5 years. The loan is structured so that Joe pays one
single payment at the end of 5 years. The single payment includes the principal
plus all interest accrued over 5 years. If Joe takes the loan will he have enough
money available from his investments to make the balloon payment? How much
will he be short/have to spare?
How much should a company invest now in order to repay a loan of Rs 2.5 million
that will mature at the end of 7 years. The company can earn an interest of 12%
on its investment.
Deven has just received a cash gift of Rs500,000 from his rich eccentric uncle. He
wants to set it aside to pay for his daughter Anishas college education. Anisha
will begin college in 10 years and Devens financial advisor says that he can earn
12% interest on an investment in a special college fund. How much will Deven
have in the fund when Anisha begins college?
The credit card company states that the interest rate is 3.40% monthly or 40.80%
annually. What is the effective interest rate if the interest is compounded monthly.
Assume that you are given a choice between incurring an immediate outlay of Rs
9,000 and having to pay Rs 2,310 a year for 5 years (first payment due one year
from now); the discount rate is 11 percent. What would be your choice?
Juan has $100,000 to invest and he has narrowed down his decision to two
investments. Option A returns 60% annually for 4 years, but the maximum
investment he can make is $10,000. Option B returns 12% annually for 4 years
and would require the entire $100,000. Which option produces the best result for
Juan and what is the benefit over the lesser option? Assume that the $90,000 not
invested in Option A would be placed in a safe deposit box earning no interest.
Gopali is in the market for a new car. He has narrowed his search down to 2
models. Model A costs $32,000 and Model B costs $28,000. With both cars he
plans to pay cash and own them for 4 years before trading in for a new car. His
research indicates that the trade in value for Model A after 4 years is 60% of the
initial purchase price, while the trade in value for Model B is 45%. The interest
rate is 5%. For simplicity assume that operating and maintenance costs for the
models are identical. Which model is the better decision and how much
"cheaper" is it than the alternative?
Option A is better by 1,429.84