a. Annuity interest rate You\'ve been offered a loan of 25000, which you will ha
ID: 2810022 • Letter: A
Question
a. Annuity interest rate You've been offered a loan of 25000, which you will have to repay in 5 equal annual payments of 8000 with the first payment due one year from now. What interest rate would you pay on that loan?
b. Alex Karev has taken out a $180000 loan with an annual rate of 9% compounded monthly to pay off hospital bills from his wife Izzys illness. If the most alex can afford to pay is $3500 per month, how long will take to pay off the loan? how long will it take for him to pay off the loan if he can pay $4000 per month? Use five decimal places for the monthly percentage rate in your calculations.
c. Mr. Bill S. Preston, Esq, purchased a new house for 90,000. He paid $25,000 upfront and agreed to pay the rest over the next 15 years in 15 equal annual payments that include principal payments plus 12% compound interest on the unpaid balance. What will these equal payments be ?
d. You plan to retire in 9 years and buy a house in Oviedo, Florida. The house you are looking at currently costs $90,000 and is expected to increase in value each year at a rate of 6%. Assuming you can earn 12% annually on your investments, how much must you invest at the end of each of the next 9 years to be able to buy your dream home when you retire?
e. Alex Karev has taken out a $180,000 loan with an annual rate of 9% compounded monthly to pay off hospital bills from his wife Izzy's illness. If the most Alex can afford to pay is $3500 per month, how long will it take to pay off the loan? How long will it take for him to pay off the loan if he can pay $4000 per month? Use five decimal places for the monthly percentage rate in your calculations.
Explanation / Answer
1.
N=5
PMT=-8000
PV=25000
FV=0
CPT I/Y=18.03067%
In Excel:=RATE(5,-8000,25000)
2.
a)
I/Y=9%/12
PMT=-3500
PV=180000
CPT N=65.21602765
In Excel:=NPER(9%/12,-3500,180000)
b)
I/Y=9%/12
PMT=-4000
PV=180000
CPT N=55.1035738
In Excel:=NPER(9%/12,-4000,180000)
3.
I/Y=12%
N=15
PV=90000-25000=65000
FV=0
CPT PMT=$9,543.5756
In Excel:=PMT(12%,15,90000-25000)
4.
I/Y=12%
N=9
PV=0
FV=90000*1.06^9
CPT PMT=$69,994.7547
In Excel:=PMT(12%,9,0,FV(6%,9,90000))
5.
a)
I/Y=9%/12
PMT=-3500
PV=180000
CPT N=65.21602765
In Excel:=NPER(9%/12,-3500,180000)
b)
I/Y=9%/12
PMT=-4000
PV=180000
CPT N=55.1035738
In Excel:=NPER(9%/12,-4000,180000)
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