Essentials Of Investments
11th Edition
ISBN: 9781260013924
Author: Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher: Mcgraw-hill Education,
expand_more
expand_more
format_list_bulleted
Concept explainers
Question
You have been accepted into college. The college guarantees that your tuition will not increase for the four years you attend college. The first
$10,200
tuition payment is due in six months. After that, the same payment is due every six months until you have made a total of eight payments. The college offers a bank account that allows you to withdraw money every six months and has a fixed APR of
4.1%
(with semiannual compounding) guaranteed to remain the same over the next four years. How much money must you deposit today if you intend to make no further deposits and would like to make all the tuition payments from this account, leaving the account empty when the last payment is made?(Note: Be careful not to round any intermediate steps less than six decimal places.)The amount of money you must deposit today is
$nothing.
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
This is a popular solution
Trending nowThis is a popular solution!
Step by stepSolved in 2 steps
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.Similar questions
- Stafford loans are the most popular form of student loan in the United States. The current interest rate on a Stafford loan is 4.34% per year. If you borrow $29,000 to help pay for your college education at the beginning of your freshman year, how much will you have to pay at the end of your freshman, sophomore, junior, and senior years for this loan? This is a total of four years over which the original loan will be repaid. The annual loan payment will be ______arrow_forwardSuppose a recent college graduate's first job allows her to deposit $250 at the end of each month in a savings plan that earns 9%, compounded monthly. This savings plan continues for 14 years before new obligations make it impossible to continue. How much money has accrued in the account at the end of the 14 years? (Round your answer to the nearest cent.) $ If the accrued amount remains in the plan for the next 15 years without deposits or withdrawals, how much money will be in the account 29 years after the plan began? (Round your answer to the nearest cent.) $arrow_forwardYou have a loan outstanding. It requires making seven annual payments of $4,000 each at the end of the next seven years. Your bank has offered to allow you to skip making the next six payments in lieu of making one large payment at the end of the loan's term in seven years. If the interest rate on the loan is 6%, what final payment will the bank require you to make so that it is indifferent to the two forms of payment?arrow_forward
- Like many college students, Diana applied for and got a credit card that has an annual percentage rate (APR) of 15%. The first thing she did was buy a new DVD player for $400. At the end of the month, her credit card statement said she only needed to make a minimum monthly payment of $15. Assume Diana makes her payment when she sees her statement at the end of each month. If Diana doesn't charge anything else and only makes the minimum monthly payments, approximately how many months would it take her to completely pay off the DVD player? Assume that the credit card company compounds interest at the end of each month. O 35.8 months O 37.8 months O 46.3 months O 50.0 months O 32.6 months Diana now realizes she needs to pay more than just the minimum payment (unless she wants to be paying for this DVD player until she graduates). She decides to pay twice the minimum monthly payment ($30 per month), instead. How much quicker will she pay off the DVD player? 19.5 months O 26.4 months O 21.1…arrow_forwardYou have a loan outstanding. It requires making three annual payments of $8,000 each at the end of the next three years. Your bank has offered to allow you to skip making the next two payments in lieu of making one large payment at the end of the loan's term in three years. If the interest rate on the loan is 5%, what final payment will the bank require you to make so that it is indifferent to the two forms of payment? The final payment the bank will require you to make is $ (Round to the nearest dollar.)arrow_forwardTo complete your last year in business school and then go through law school, you will need $5,000 per year for 4 years, starting next year (that is, you will need to withdraw the first $5,000 one year from today). Your uncle offers to put you through school, and he will deposit in a bank paying 8.5% interest a sum of money that is sufficient to provide the four payments of $5,000 each. His deposit will be made today. Do not round intermediate calculations. Round your answers to the nearest cent. If your answer is zero, enter "0". How large must the deposit be? $ How much will be in the account immediately after you make the first withdrawal? After the last withdrawal? After the first withdrawal: $ After the last withdrawal: $arrow_forward
- Often, through government-supported programs, students may obtain "bargain" interest rates such as 6% or 8% to attend college. Frequently, payments are not due and interest does not accumulate until the student stops attending college. A student has borrowed $22,000 at an annual interest rate of 7.5%. Calculate the amount of interest due 6 months after the student must begin payments The interest due is $arrow_forwardNick set up a savings plan with CIBC whereby he deposits $337 at the end of each quarter for 4 years. Interest throughout the 4-year time period is 1.58% compounded quarterly. The amount in his account at that time will become a term deposit withdrawable after a further 9 years, where interest changes to 4.58% compounded semi-annually. Calculate the total interest earned on the investment. Round your answer to the nearest dollar. Full solution to this problem required.arrow_forwardSuppose a recent college graduate's first job allows her to deposit $250 at the end of each month in a savings plan that earns 9%, compounded monthly. This savings plan continues for 13 years before new obligations make it impossible to continue. If the accrued amount remains in the plan for the next 15 years without deposits or withdrawals, how much money will be in the account 28 years after the plan began? (Round your answer to the nearest cent.)arrow_forward
- You have a loan outstanding. It requires making nine annual payments of $7,000 each at the end of the next nine years. Your bank has offered to allow you to skip making the next eight payments in lieu of making one large payment at the end of the loan's term in nine years. If the interest rate on the loan is 8%, what final payment will the bank require you to make so that it is indifferent to the two forms of payment?arrow_forwardYou currently have two loans outstanding: a car loan and a student loan. The car loan requires that you pay $322 per month, starting next month for 34 more months. Your student loan is requires that you pay $145 per month, starting next month for the next 46 months. A debt consolidation company gives you the following offer: It will pay off the balances of your two loans today and then charge you $511 per month for the next 37 months, starting next month. If your investments earn 4.14% APR, compounded monthly, how much would you save or lose by taking the debt consolidation company’s offer? If you lose, state your answer with a negative sign (e.g., -25,126)arrow_forward
arrow_back_ios
arrow_forward_ios
Recommended textbooks for you
- Essentials Of InvestmentsFinanceISBN:9781260013924Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.Publisher:Mcgraw-hill Education,
- Foundations Of FinanceFinanceISBN:9780134897264Author:KEOWN, Arthur J., Martin, John D., PETTY, J. WilliamPublisher:Pearson,Fundamentals of Financial Management (MindTap Cou...FinanceISBN:9781337395250Author:Eugene F. Brigham, Joel F. HoustonPublisher:Cengage LearningCorporate Finance (The Mcgraw-hill/Irwin Series i...FinanceISBN:9780077861759Author:Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan ProfessorPublisher:McGraw-Hill Education
Essentials Of Investments
Finance
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Mcgraw-hill Education,
Foundations Of Finance
Finance
ISBN:9780134897264
Author:KEOWN, Arthur J., Martin, John D., PETTY, J. William
Publisher:Pearson,
Fundamentals of Financial Management (MindTap Cou...
Finance
ISBN:9781337395250
Author:Eugene F. Brigham, Joel F. Houston
Publisher:Cengage Learning
Corporate Finance (The Mcgraw-hill/Irwin Series i...
Finance
ISBN:9780077861759
Author:Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor
Publisher:McGraw-Hill Education