Josh wants to borrow money for a kitchen renovation. He has saved $2500 already but the cost estimate is $10,000. What would be the best deal for him and why? Option A: Should he borrow the money from the bank at 4.3% interest with a 3 year term making monthly payments? Option B: Should he wait another year, which will allow him to save another $2000 and borrow the rest at 4.3% for a 2 year term making monthly payments? Cost of Borrowing Monthly Cost Option A Option B Your advice for Amount borrowed Pros Cons Total cost of renovation

Josh wants to borrow money for a kitchen renovation. He has saved $2500 already but the cost estimate is $10,000. What would be the best deal for him and why? Option A: Should he borrow the money from the bank at 4.3% interest with a 3 year term making monthly payments? Option B: Should he wait another year, which will allow him to save another $2000 and borrow the rest at 4.3% for a 2 year term making monthly payments? Cost of Borrowing Monthly Cost Option A Option B Your advice for Amount borrowed Pros Cons Total cost of renovation

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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Similar questions

Hashim wants to invest an amount of OMR. 9800 every year to buy a house at the end of 10 years. For this purpose, he wants to invest some money in a saving bank but does not know the exact amount of money he will get after 10 years a) What amount will he receive assuming an interest rate of 4.005%? b) What amount will he receive assuming an interest rate of 5.50%? c) Suggest the option which will be enough to meet his house which is estimated to be OMR. 100000?
John is looking for a new car. He has a down payment of $1,000.00 and wants to pay $350.00 per month for 5 years. The best deal he found for an amortized loan is his local bank, at a rate of 2.65%. What is the highest price car he should consider buying?
Simon is considering purchasing an emu, which he can graze for free in his backyard. Once the emu reaches maturity (in exactly three years), Simon will be able to sell it for $2,000. The emu costs $1,500. a. Suppose that interest rates are 8%. Calculate the net present value of the emu investment. Does the NPV indicate that Simon should buy the emu? b. Suppose that Simon passes on the emu deal, and invests $1,500o in his next-best opportunity: a safe government bond yielding 8%. Is this outcome better or worse than buying the emu? Please explain.
Liam has three other options for purchasing the Charles Street property. In the first scenario, he could borrow additional money to fund a renovation of the building. He wants to determine the monthly payment for the renovation. Use the monthly interest rate, the loan period in months, and the loan amount to calculate the monthly payment for the renovation scenario. In the second scenario, Liam could pay back the loan in 20 years instead of 15 and reduce his monthly payments to $6,000 with an annual interest rate of 4.5%. He wants to know the loan amount he should request with those conditions. Use the monthly interest rate, the loan period in months, and the monthly payment to calculate the loan amount for the 20-year scenario. In the third scenario, Liam could pay back the loan for eight years with a monthly payment of $8,000 and then renegotiate better terms. He wants to know the amount remaining on the loan after eight years, or the future value of the loan. Use the monthly…
Benjamin knows that he will be receiving $100,311 to settle an insurance claim, but he will not actually be paid for another 3 months. Needing cash now, he is considering an offer from a finance company to buy this payment from him by paying him cash today. The annual simple discount rate they are offering him is 27%. How much would he receive if he takes this deal? Round your answer to the nearest dollar.
Ken wants to remodel his basement and he wants to pay back no more than $18,000. If he gets a low interest loan at 3.75% compounded semi - annually and plans to repay the loan in one payment in 3 years, how much can he borrow? Show all workings.
Joe wants to have $20,000 three years from now so that he can make a down payment on a condo. If he can get a 5% interest rate, how does he determine how much to invest? Group of answer choices Multiply $20,000 times the present value of $1 with an interest rate of 5% and 3 time periods. Joe would need to invest $20,000 less 3*(5% of 20,000) or $17,000. Divide $20,000 by the present value of $1 with a 5% interest rate and three time periods. Multiply $20,000 times the future value of $1 with an interest rate of 5% and 3 time periods.
Arthur is planning on buying a house and needs to take out mortgage for $200,000 . He has two choices a 30 year with monthly payments of $1,468 and a 15 years with monthly payments of 1,854 . Arthur want to pay the Lowest interest rate possible What is interest rate on each mortgage and which mortgage should he pick? He changes his mind and want to pay the smallest amount of total interest. What are the total interest charges for each mortgage and which mortgage should he pick now ?
Jason wants to purchase property for $88,000 cash or he can purchase the property for $30,000 down and 2 equal payments of $30,000 at the end of 1 and 2 years respectively. If money is worth 4% compounded monthly then which is the best plan now? a) How much will Jason save now by choosing the best plan?
Dan is contemplating trading in his car for a new one. He can afford a monthly payment of at most $500. If the prevailing interest rate is 2.4%/year compounded monthly for a 48-month loan, what is the most expensive car that Dan can afford, assuming that he will receive $6000 for his trade-in?
Pierre is deciding whether he should rent or buy a house. Assuming that renting an apartment will cost of him $1,500 per month and the mortgage on a house is $3,500 per month. If he rents, he considers investing the difference between monthly rental cost and mortgage cost in a Balanced Fund earning 8% per year. If the house he purchases in Oshawa, Ontario costs about $800,000 and he intends on paying off the mortgage after 25 years. If he decides to sell the house in 25 years and the house appreciates at a rate of 4% per year: Question 1 What would be the better outcome, renting or buying and by how much? (Show your work and include all financial calculators) Calculate the investment value of renting versus home ownership. Question 2 Based on your answer in Question 1, what factors would make you change your mind and choose the other. List a minimum of 3 reasons or factors and elaborate as to why.
An investor plans to purchase a 2-bedroom condo in San Francisco. The price of the property is $300,000. She will have a 15-year 3% APR mortgage with a 20% down payment. The investor will keep the condo in the next 15 years and lease the condo. Suppose the rent collected by the renter will just cover the mortgage payment and other expenses (e.g., condo fee, tax, maintenance). In other words, in- and out- cash flows just cancelled out. The value of the house is expected to inflate by 50%. What is the monthly return to the investor? Group of answer choices 14.377% 1.198% 1.126% 13.508%

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