Question

Calculate all of the problems in the document below in an Excel spreadsheet or on a financial calculator. Please show your work in order to get credit. For each problem, state the inputs given, what you are being asked to find (the missing input), and then use the Finance function to get the correct answer (if using Excel).

17. If you invest $17,500 per year for 17 years (all payments made at the beginning of each year), you will have accumulated $315,000 at the end of the period. What annual rate of return is the investment offering?

18. You are valuing an investment that will pay you $10,000 the first year, $12,000 the second year, $14,000 the third year, $16,000 the fourth year, $20,000 the fifth year, and $25,000 the sixth year (all payments are at the end of each year). What is the value of the investment to you today if the appropriate annual discount rate is 15%?

EXTRA CREDIT:

19. You plan to buy a car that has a total "drive-out" cost of $25,700. You will make a down payment of $3,598. The remainder of the car’s cost will be financed over a period of 5 years. You will repay the loan by making equal monthly payments. Your quoted annual interest rate is 8% with monthly compounding of interest. (The first payment will be due one month after the purchase date.) What will your monthly payment be?

20. You are considering leasing a car. You notice an ad that says you can lease the car you want for $475.00 per month. The lease term is 60 months with the first payment due at the inception of the lease. You must also make an additional down payment of $2,500. The ad also says that the residual value of the vehicle is $25,400. After much research, you have concluded that you could buy the car for a total "drive out" price of $35,950. What is the quoted annual interest rate you will pay with the lease?

Answer 1

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