a. you will repay the same amount of money at the conclusion of aloan that you b

ID: 2770489 • Letter: A

Question

you will repay the same amount of money at the conclusion of aloan that you borrowed at the beginning of the 2 year loan.

the “cost” of using money for 2 years is zero.

you will receive the same amount of money at maturity thatyou invested at the beginning of a 2 year investment.

all of the above.

you will repay the same amount of money at the conclusion of aloan that you borrowed at the beginning of the 2 year loan.

the “cost” of using money for 2 years is zero.

you will receive the same amount of money at maturity thatyou invested at the beginning of a 2 year investment.

all of the above.

(a) Cost of the House = $875,000

Less: DownPayment = $50,000

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$825,000

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Number of Years = 30Years(30*12) 360 Periods

Interest rate = 6%(0.06/12) 0.005 (or) 0.5%

Future Value Factor (360,0.5%) 1004.517283

(using Excel sheet)

PMT *1004.517283 $825,000

PMT $825,000 / 1004.517283

(e) Future Value of cash flows (FV) = $1,200

Number of years (t)= 5 years

Interest rate (r) = 10%

Present Value = Future Value / (1+r)t

= $1,200 / (1.1)5

= $1,200 / 1.61051

(d) Receiving Payment amount = $100

Number of years = 5 years

Interest rate = 8%

Future Value of an ordinary annuity due factor = Future value ofan ordinary annuity value * (1+r)

FVoA = 5.867 * (1+0.08)

Hope it may helps you

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