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BA332
Name_______________
Homework: Feb 26, 2013
1. If four years of college is expected to cost $150,000 18 years from now, how much must be deposited now into an account that will average 8% annually in order to save the $150,000? By how much would your answer change if you expected 11% annually?
2. Prizes are often not “worth” as much as claimed. Place a value on a prize of $5,000,000 which is to be received in equal payments over 20 years, with the first payment beginning today. Assume an interest rate of 7% over the 20 years.
3. Show numerically that a savings account with a current balance of $1,000 that earns interest at 9%
annually is precisely sufficient to make the payments on a three year loan of $1,000 which carries equal annual payments at 9% interest.
4. What will be the monthly payment on a home mortgage of $75,000 at 12% interest, to be amortized over 30 years? Use your Excel and develop an Amortization Schedule for this loan.
5. Your real estate agent mentions that homes in your price range require a payment of approximately $1,200 per month over 30 years at 9% interest. What is the approximate size of the mortgage with these terms?
