Question

1. (15% Marks) Engineer Jimmy wants to retire in 10 years and would like to have 1 million Euros at that time. If the interest rate is expected to be 6% over the next 10 years, what annual amount would he need to save? 2. (15% Marks) Rosalynn has purchased a house with a loan of $550,000. If the loan interest rate is 6%, what will be her annual payments over the life of the 20-year loan? 3. (15% Marks) Gerald has decided to save for a trip in two years. If the monthly interest rate is 1.5% and he saves $2,500/month, how much will he have saved after 2 years? 4. (15% Marks) Yi has decided to purchase a new moped and the discrete interest rate is 0.6% per month and the purchase price is $27,000. The payments will be at the end of the month; what is her expected monthly payment over the 3-year period? 5. (20% Marks) Marlene won the Irish Sweepstakes of 30 million Irish pounds. The prize is actually 3 million pounds per year for 10 years. If the payments are 10 beginning of year payments and the discrete interest rate is 5%, what is the equivalent total amount she would receive if she took a single payment? Note: since payments are end-of-year, she has 9 end-of-year payments plus the initial first payment. 6. (20% Marks) Vladimir has purchased a new car and the discrete interest rate is 2% per month and the purchase price is $43,000. a) What is the expected monthly payment over a 4-year period? b) What is the total interest paid over the 4-year period?

Answer 1

(Alf, di, n) = [ en ] /Lean ] Therefore A f [eo] Tern ] => 1000000 [2006] [eeoGxio ] ☆ 1000000 [ 1.061836 - 1] [10822 118 - 0] => 1000000 [-061836] [-822118] 1000000 [•07521548] → € 75,215.48 TIT

Ans 2 Call, a,n) =(con Ce=15] / [eon_1] A = p [em (C+)] / [eon- 7 = 55000 L 2606*70 (covek ) (20.06X20_1) = 550000[3.320116] [10061836-1 (3.320116-1) 550,000 [ 3.3201167 CO. 061836) 2.320116 $ 48,668.46 Ans (F/A, 1, 1) = [ en ] /ed ] - A Leven Com = 2500 [ 018x24 ] eools → 2500 [16433329-1] > 2500 (43.3329) + $71681-499 1.015113-1 015113

Ang A (Alp, dr, n) => [ean celo] ein A - P [ein Cell - 27,000 (2006x36 Leoooo )) (eo6x36) > 27,000 [ e•216 ( e-006-1)] (2.216_1) 27,000 [1.241102 (1.006018-))) (7.241102-1) 270000 [1.201102] (0.006018) 0.241102 ($836-4165

Angs (P/A, dr, n) = [eon ] / ern ceri) P = Alean con (ed_l) for this problem first payment must be paid at Begining of first year at time zero) and Then the following 9 end of Period Payment Result in P = A + A[eon_1] / [eance%)] A[i+ Ceano] / [ean ceri] = 30,60 00 [1+ (05*9)]/[e•osa (2005) = 30,00000 [it (e us o]/[e: 45 (coosi) 30.09do! I + C1568312-177 1• 568312(1•081271-1) >> 30,00.000 [1 +0.568312] 10568312 ( 081271). > 5,85,12,609.467 Irish Pound

Aus 6(a) Discrete interest rate = 2% purchase price = $43000 time period = 4 years (A/p,x,n) = [et(ev)]/con .. A = p lemn (e* -»)] / [ean_] = 43000 23-02x48(2002)] (10.02x48_1) . - 43000 [2.611696 (1.020201-1] (2.611696-1) 43000 (2061169610.02020)]] 22 68.6314 (10 611 696) - 1-61169.6 = 1407,60 $, . His Total expected monthly installement = = 190760 1407.60 amount paid by him over the years = 11 The total interest = 67564.80$ paid = 67564.80-43000 = 24564.8$