Question

You are the beneficiary of a trust set up by your grandparents. You will receive your first $2,000 cash ten years from now (T

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Answer #1

Question 6:

Option d is correct

First Cash amount = $ 2000

Growth Rate = 3%

Discount Rate = %

Value of perpetuity 10 years from now = ($2000)/(0.05-0.03)

= $ 100,000

Present Value of Perpetuity = $ 100,000 * Growth Rate Discounting factor for 10 years

= $ 100,000 * 0.74409

= $ 74,409

Question 7:

EMI for Mortgage Loan is $ 1909.66

(1+r) - 1
where

  • A = payment Amount per period
  • P = initial Principal (loan amount)
  • r = interest rate per period
  • n = total number of payments or periods

How many payments to be made to ensure $300000 equity in home is 303 installment ( in 26th year)

Repayment schedule in 26th year

year 25 end
301 $103,692.82 $345.64 $1,564.02 $102,128.81
302 $102,128.81 $340.43 $1,569.23 $100,559.57
303 $100,559.57 $335.20 $1,574.46 $98,985.11
304 $98,985.11 $329.95 $1,579.71 $97,405.40
305 $97,405.40 $324.68 $1,584.98 $95,820.42
306 $95,820.42 $319.40 $1,590.26 $94,230.16
307 $94,230.16 $314.10 $1,595.56 $92,634.60
308 $92,634.60 $308.78 $1,600.88 $91,033.72
309 $91,033.72 $303.45 $1,606.21 $89,427.51
310 $89,427.51 $298.09 $1,611.57 $87,815.94
311 $87,815.94 $292.72 $1,616.94 $86,199.00
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