Essentials Of Investments
11th Edition
ISBN: 9781260013924
Author: Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher: Mcgraw-hill Education,
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Assume that you plan to buy a condo 5 years from now, and you need to save for a
down payment. You plan to save $2,500 per year (with the first deposit made immediately),
and you will deposit the funds in a bank account that pays 4% interest. How
much will you have after 5 years? How much will you have if you make the deposits
at the end of each year? ($14,082.44, $13,540.81)
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- The bank will loan you $175,000 to buy a house. The loan terms are as follows; 30 year mortgage with monthly payments and a 6.9% annual interest rate (monthly compounding). What will your monthly payments be to the bank? If you will pay $1500 each year in taxes, $1200 in insurance, and $400 in HOA fees, how much will your total mortgage payments be each month? How much interest will you pay over the 30 year life of the loan?arrow_forwardYou want to buy a new house. You can afford to pay $15,000 per year for 30 years with the first payment being due one year from today. If the interest rate on your loan is 3%, what price of home can you buy today? Enter your answer as a number rounded to 2 decimal places.arrow_forwardYou deposit $1.2 million into your account to cover expenses in the next 12 years. The account earns interest at the rate of 4%, compounded annually. Assume you expect the balance of the account to be $0 at the end of the 12th year. a) What annual level of living expenses will your initial deposit support? (e.g., what equal annual withdrawal can you make for the next 12 years)? b) Suppose you realize your living expenses will increase at an annual rate of 2% due to inflation. Determine the updated annual spending plan in line with this model: how much can you withdrawal at the end of the first year, knowing that your withdrawal will increase by 2% each year? c) Suppose the initial deposit is still planned to support your equal annual expenses in the next 10 years as in part a), but don't need to withdraw any money from your account for the first 6 years. You will withdraw from your account annually starting from the end of year 7 till the end of year 12. What annual level of living…arrow_forward
- You want to buy a house. The loan amount will be $285,000.00. A bank is offering a 5% interest rate for 240 months (20 years). What will your monthly payments be? My monthly payment will be $_________ .arrow_forward1. What is the amount you would have to deposit today to be able to take out $2070 a year for 2 years from an account earning 14 percent. 2. If you desire to have $38300 for a down payment for a house in 11 years, what amount would you need to deposit today? Assume that your money will earn 4 percent.arrow_forwardYou would like to have $550,000 when you retire in 40 years. How much should you invest each quarter if you can earn a rate of 3.6% compounded quarterly?a) How much should you deposit each quarter?b) How much total money will you put into the account?c) How much total interest will you earn?arrow_forward
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- You have just made an offer on a new home and are seeking a mortgage. You need to borrow $620,000. a. The bank offers a 30-year mortgage with fixed monthly payments and an interest rate of 0.53% per month. What is the amount of your monthly payment if you take this loan? b. Suppose you take the 30-year mortgage described in part (a). How much will you still owe on the mortgage after 10 years? a. The bank offers a 30-year mortgage with fixed monthly payments and an interest rate of 0.53% per month. What is the amount of your monthly payment if you take this loan? Your monthly payment will be $nothing. (Round to the nearest cent.) b. Suppose you take the 30-year mortgage described in part (a). How much will you still owe on the mortgage after 10 years? The remaining loan amount will be $nothing. arrow_forwardAnswer the following question using a spreadsheet and the material in the appendix. You would like to buy a house. Assume that given your income, you can afford to pay $12,000 a year to a lender for the next 30 years. If the interest rate is 7% how much can you borrow today based on your ability to pay? What about if the interest rate is 3%? Maximum mortgage at 7%: $ Maximum mortgage at 3%: $arrow_forwardYou take out a 20-yearmortgage for $310,000 to buy a new house. What will your monthly payments be if the interest rate on your mortgage is 9 percent? Use a spreadsheet to calculate your answer. Now, calculate the portion of the 96th monthly payment that goes toward interest and principal. Use five decimal places for the monthly interest rate in your calculations. a. Using a spreadsheet to calculate your answer, your monthly payments will be arrow_forward
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