Question

1. You own the 1956 Bentley pictured to the right. The car cost you $45,000, but you need to sell it, and have it listed for $42,000. Your friend says he wants to buy it, but he can’t get a loan. He says that he can pay you $9,999 next year, $11,999 the following year, $9,999 in the year after that, and $11,999 in four years. If interest rates are about 2%, should you take the deal? Justify your answer.

2. You have another friend who wants to buy the Bentley. He can’t get a car loan either, so he says that if you sell him the car, he’ll pay you $54,489 four years from now. If interest rates are about 5%, should you sell him the car? Justify your answer.

3. Suppose you let your second friend buy the car. How much will he have to deposit monthly in order to pay you $54,489 in four years?

4. You just found out that your grandmother set up a trust for you. It will pay you $6,599 a quarter for the next 10 years. If interest rates are about 4%, what is this worth to you now?

5. You won a lawsuit that will provide you with $30,000 three years from now. If interest rates are about 4%, what is this worth to you now?

Answer 1

SEE THE IMAGE. ANY DOUBTS, FEEL FREE TO ASK. THUMBS UP PLEASE