6. You can afford 550/month for a car and have been approved by a local bank for
ID: 2616485 • Letter: 6
Question
6. You can afford 550/month for a car and have been approved by a local bank for a 5 year loan at 1.9% annual rate. How expensive of a car can you purchase? You deposit $10,000 into a bank which promises to pay you 5.75% compounded semiannually for 10 years. How much will you have at the end of the 10 years? 7. 8. Use the following tax table to answer this question: Taxable Income Tax Rate 50,000 15% 0- 50,001 75,000 75,001100,000 100,001-335,000 25 34 39 34 335,00110,000,000 The Holiday Inn earned $208,915 in taxable income for the year. How much tax does the company owe on this income? What is the average tax rateExplanation / Answer
Answer to Question 6:
Monthly Payment = 550
Annual Interest Rate = 1.90%
Monthly Interest Rate = 0.1583%
Period of Loan = 5 years or 60 months
Price of Car = 550 * PVIFA(0.1583%, 60)
Price of Car = 550 * (1 - (1/1.001583)^60) / 0.001583
Price of Car = 550 * 57.19557
Price of Car = 31,457.56
So, you can afford to buy a car costing 31,457.56 or 31,458
Answer to Question 7:
Amount deposited = $10,000
Annual Interest Rate = 5.75%
Semiannual Interest Rate = 2.875%
Period = 10 years
Semiannual Period = 20
Future Value = $10,000 * (1 + 0.02875)^20
Future Value = $10,000 * 1.02875^20
Future Value = $17,627.75
So, you will have $17,627.75 or $17,628 after 10 years.
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