Question

1. a) A company estimates that it will need $53,000 in 17 years to replace a computer. If it establishes a sinking fund by making fixed monthly payments into an account paying 4.8% compounded​ monthly, how much should each payment​ be?

b) American General offers a 8​-year annuity with a guaranteed rate of 6.05​% compounded annually. How much should you pay for one of these annuities if you want to receive payments of ​$1400 annually over the 8 year​ period?

c) ​E-Loan, an online lending​ service, recently offered 60​-month auto loans at 4.8% compounded monthly to applicants with good credit ratings. If you have a good credit rating and can afford monthly payments of $298​, how much can you borrow from​ E-Loan? What is the total interest you will pay for this​ loan?

Answer 1

Q1. a) $168.55

b)$8676.5

c)Loan amount=$15868.17 , interest pay=$4294.57

(12) 12 12 Ql. a) Equation of Value X Sonary 53000 209 x (1.004®-1) 53000 0.004 53000 314.44 $ 168-55 Amount - Present Value of the annenity Amount 1400 ag]@6-054 = 1400 (1 - 1.0605) 0.0605 - 1400 6.1975 $8676.5 48=0.4% 12 12 Loron Amount = Present Value of all the monthly hayments 298 a 260 @ @ 0.4% = 298*(1 1004] 0.004 = 298 x 53-2489 = $ 15868.17

Total Interest hay the Value of amount at the end of last payment - Amount of loan 15868-17 (1.004) - 15868.17 $ 4294.57