Finance Assignment 1

Problem 1:
a. We subtract 40,000 from 420,000 to get 380,000
Convert APR to EMR which is r = 0.004401286
380,000 = C1/(0.004401286) * (1-1/(1. 0.004401286)^300)
C1 = 2284.14 per month payment

b.
find the present value annuity of the payments that are based on 25 years
PVA = 2284.14137 (from previous) /0.00401 * (1-1/(1.00401^36)
PVA = 76,427.036
Subtract this from $380,000 to get remaining amount of $303,572.964

Problem 2:
a.
PVA3 = 60,000/(0.21)* ( 1-1/(1.21^6)
= 194,676.9092

PV(Y0) = 194,676.9092/(1.10^3)
= 146,263.6433 + 100,000 = 246,263.6433
b.
PVA(Y0) = 60,000/(0.10) * (1- (1/(1.10)^20)
= $510,813.8232 + 100,000
= $610, 813.8232
c.
PVA = 45,000 / (0.10) * (1-(1/(1.10)^25)*(1.10)
PVA(Y0) = $449,313.4809
PV = $299,000/ (1.10)^27 = 22807.02765
Total PV (Y0) = $472,120.5085

Best option is b and worst is a so net would be

$610, 813.8232 - 246,263.6433 = $364,550.1799

Problem 3:
This is a painful guess and check:
29,900 = 1200/r*(1-1/(1+r)^36)
r= 0.021 per month which is the EMR

Problem 4:
The future value of the annuity has to equal the present value of the perpetuity
750 ( (1+r)^40-1/r) = 1000/r
r = 0.0214 per quarter therefore the Ear
(1.0214)^4 -1 = 0.08838 per year or 8.8838 %

Problem 5.
From t2 to t36 there will be 34 payments
55,000 = C1/(0.005)*(1-1/(1.005)^34)
C1= 1763.07208

Problem 6.
Problem 6a.
100(1.10)^30 = 17,449.40227
FVA= (1.10)^30-1/0.10 *100 = 16,449.40227
Total = 33,898.80453
Problem 6b.

PVA = C1/0.05(1-1/(1+r)^t)
FV= (1614.10)(1.05)^31
= 7324.8829
Problem 6c.
26,822.72564= C1/(0.05)*(1/(1.05)30)
C1= 1744.856796
Problem 7:
Pv*r = C1
= 15,000/0.07 = 214,285.7143
214,285.7143= C1/(0.07) * ( 1-1/(1.07)^37)
C1= 16,336.46742
Problem 8:
1000 = 100/0.02 (1-1/(1.02)^t)
t= log (1.25)/log(1.02)
t= 11.268 months
Problem 9
a.
PVA(Y3) = 5000/(0.03-0.05)*(1-(1+0.05)/(1+0.03)^25)
PVA(Y3) = $154,335.4948
PVA(Y0) = $154,335.4948/(1.03)^3
PVA(Y0) = $141,238.8408

b.
g= r
the growth rate equals the interest rate therefore we use the formula:
PV (Y3) = C(Y4)*25 (number of payments)
= 125,000
Pv(y0) = 125,000/(1.05)^3
= 107,979.6998
c.
PVGA(Y3) = 5000/(0.1-0.05)*(1-((1.05)/(1.10))^25
= 68,745.29905
PVA (Y0) = 68,745.29905/ (1.10)^3
= 51,649.36067