Question

2. An investment will pay $5,000 at the end of each of the next 3 years, $12.000 at the end of Year 4, $30,000 at the end of Year 5, and $50,000 at the end of Year 6. If other investments of equal risk earn 7% annually, what is its future value? Steps (9 points): Answer (1 point): Amortization Questions 3. You want to buy a car, and a local bank will lend you $18,000. The loan will be fully amortized over 3 years and the nominal interest rate will be 8.5%. A) What will be the annual loan payment (fixed payment - annuity amount)? Construct the Amortization table and complete it (14 points): Answer (1 point): 2 Page

Answer 1

Ans: 1) Calculation of future value Future value - Bresent Value litin i= Interest Rate n = time period ч Yeart 5350 yeara 5749 year 3 3 5000 X (1+0.07) 5000 m (1+0.07)! 5000 x 11+ 0.0713 sooox (1.073 12000 x 11-07) 30000 x 11.07) 50000 x 11.0706 = 5 yeary year 5 S year 6 6152 15730 42077 75037 Tot future value R/off $150088 $ 150000 CS Scanned with CamScanner

Date Page 2.) Calculation of Annual loan payment Annual loan payment Loan amount C Puf at the rate of Borrowing cpuf = cumulative of pive factor Loan amount = 18000 Interest Rate = 8.5% Annual payment 18000 Cput@8-5% (t-13) | 8000 2.5syo $ 7048 Annual loan payment » Loan Amortization Table years opening Inte Installment Principal closing Balance @ 8.5% 1 8000 1530 7048 L 5518 2. 12482 1061 7048 5987 6495 3 6495 7048 6495 - NIL Balance 12482 553 CS and waith Camer