Quanitive method (Finance)
- A $25,000 debt is to be discharged with quarterly payments over eight years by a sinking fund plan. If the plan accumulates money at 18% compounded annually, find:
- The amount and the book value of the fund and the debt at the end of 6 years.
- The amount in the fund at the end of the third year.
- The mortgage for $75,000 is to be amortized over 20 years with monthly payments. If the interest rate is 13.5%, compounded semi annually, find:
- The size of the monthly payments.
- The outstanding balance at the end of 5 years.
- If the payments for the original mortgage has come at the beginning of each month what would the answer to part(A), have been?
- If the people taking out the mortgage in part(A) has increased the required payments by $100 per month what would the required number of payments to repay the mortgage?
- A debt of $8,000 is to be repaid with regular payments of $500 per month. If the interest rate is 18%, compounded monthly, find the exact value of the final payment to discharge the debt.
- Suppose you entered into an RRSP fund which requires you to start making monthly payments of $50 in 10 months and every month thereafter. How many monthly deposits will be required for an amount which is presently equivalent to $25,000? Assume the interest rate is 17.2% compounded
- The cost of a new hotel is estimated to be $10,000,000. Thereafter it is expected to cost $3,000,000 each time it is renovated (excluding any inflation calculations). Based on current standards the hotel will be renovated every 15 years. If money can be invested 15%, compounded monthly, what is the capitalized cost of the hotel?
- A gravel pit is estimated to yield an income before depletion of $75,000 for 20 years. The salvage value of the land is estimated to be $1,500 at the end of the 20 years. Find the purchase price an investor should be prepared to pay if he desires a 16%, annual return, on his investment. Assume that one can invest money in a sinking fund at 15%, compounded annually.
- An annuity offers monthly payments of $10000 at the beginning of each month and has interest rate of 6% compounded annually. If the annuity can be purchased today for $10,000, how long will the monthly payments continue.
- A company is thinking about purchasing a new machine that will increase operating efficiency and save $2,500 every 6 months in labor costs. It is estimated that the machine will last ten years and then it can be sold for scrap for $1,000. If money is worth 7%, compounded annually, what is the maximum price the company should pay for the machine?
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