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Your parents have accumulated a $120,000 nest egg

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Question

Your parents have accumulated a $120,000 nest egg. They have been planning to use this money to pay college

costs to be incurred by you and your sister, Courtney. However, Courtney has decided to forgo college and start a nail salon. Your parents are giving Courtney $33,000 to help her get started, and they have decided to take year-end vacations costing $10,000 per year for the next four years. Use 7 percent as the appropriate interest rate throughout this problem. Use Appendix A and Appendix D for an approximate answer, but calculate your final answer using the formula and financial calculator methods.

   
a. How much money will your parents have at the end of four years to help you with graduate school, which you will start then? (Round your final answer to 2 decimal places.)Funds available for graduate school?

b. You plan to work on a master’s and perhaps a PhD. If graduate school costs $30,300 per year, approximately how long will you be able to stay in

school based on these funds? (Round your final answer to 2 decimal places.)

How many years?

 
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Your company plans to borrow $12 million for 12 months

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Question

Your company plans to borrow $12 million for 12 months, and your banker gives you a stated rate of 15 percent

interest.  

Calculate the effective rate of interest for the following types of loans

D-Discounted interest with a compensating balance of 6 percent. (Use a 360-day year. Input your answer as a percent rounded to 2 decimal places.)

 
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If you invest $15,000 today

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Question

If you invest $15,000 today, how much will you have in each of the following instances? Use Appendix A as

an approximate answer, but calculate your final answer using the formula and financial calculator methods

 In 14 years at 8 percent (compounded semiannually

 
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Annuity payments

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Annuity payments are assumed to come at the end of each payment period (termed an ordinary annuity). However, an

exception occurs when the annuity payments come at the beginning of each period (termed an annuity due).

What is the future value of a 12-year annuity of $2,700 per period where payments come at the beginning of each period? The interest rate is 8 percent. Use Appendix C for an approximate answer, but calculate your final answer using the formula and financial calculator methods. To find the future value of an annuity due when using the Appendix tables, add 1 to n and subtract 1 from the tabular value. For example, to find the future value of a $100 payment at the beginning of each period for five periods at 10 percent, go to Appendix C for n = 6 and i = 10 percent. Look up the value of 7.716 and subtract 1 from it for an answer of 6.716 or $671.60 ($100 × 6.716). (Do not round intermediate calculations. Round your final answer to 2 decimal places.)

A-Cost of Loan?

 
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