1. Lee Associates borrowed $60,000. The company plans to set up a sinking fund t
ID: 2751976 • Letter: 1
Question
1. Lee Associates borrowed $60,000. The company plans to set up a sinking fund that will pay back the loan at the end of 12 years. Assuming a rate of 8% compounded semiannually, the amount to be paid into the fund each period is.
2. Roger Fox made deposits of $900 semiannually to Reed Bank, which pays 6% interest compounded semiannually. After seven years Roger made no more deposits. What will be the balance in the account eight years after the last deposit?
3. Jim Hunter has decided to retire to Florida in 10 years. What amount should Jim invest today so that he will be able to withdraw $25,000 at the end of each year for 30 years after he retires? Assume he can invest money at 9% interest compounded annually.
4. Given: $140.10 per month; cash price $5,600; down payment $0 Cash or trade months with bank-approved credit; amount financed $5,600 Finance charge $2,806
Explanation / Answer
1)
Amount to be paid into the fund each semi annual period = Loan Amount/((1+r/2)^2n-1)/(r/2))
Amount to be paid into the fund each semi annual period = 60000/(((1+8%/2)^(2*12) -1)/(8%/2))
Amount to be paid into the fund each semi annual period = $ 1535.21
2)
Balance in the account eight years after the last deposit = Semiannual deposit*((1+r/2)^2n-1)/(r/2)) *(1+r/2)^(2*8)
Balance in the account eight years after the last deposit = 900*(((1+6%/2)^(2*7) -1)/(6%/2)) * ( 1+ 6%/2)^16
Balance in the account eight years after the last deposit = $ 24,676.68
3)
Amount required at the time of retirement = Annual Withdrawl*(1-(1+r)^-n)/r
Amount required at the time of retirement = 25000*(1-(1+9%)^-30)/9%
Amount required at the time of retirement = 256841.35
Amount should Jim invest today = Amount required at the time of retirement /(1+r)^10
Amount should Jim invest today = 256841.35/1.09^10
Amount should Jim invest today = $ 108492.56
4)
Total Payment = amount financed + Finance charge
Total Payment =5600 + 2806
Total Payment = 8406
Cash or trade months = Total Payment /Monthly Cash Payment
Cash or trade months = 8406/140.10
Cash or trade months = 60 Months
Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.