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Date Posted: 08:30:41 04/11/01 Wed
Author: Cheryl Saunders
Subject: TVM Problems

Would someone provide the correct methods to solve the following problems?
-You want to secure a loan of $350,000. The interest rate is 100 percent per year. You offer to make payments of $50,000 per year in years 1 and 2 and $40,000 per year in years 3 and 4. If the loan is to be repaid in 16 years, what is the amount of the 12 equal payments to be made in each of the last 12 anniversaries of the loan?

-You are about to deposit $2000 into one of the following savings accounts to be left on deposit for 25 years. Each bank offers an account with a different interest rate and compounding period. Assuming you want to maximize your wealth, which of the following bank accts. would you choose and how much money would be in that account in 25 years?
BankA: 6.86 percent rate compounded daily
Bank D: 6.82 percent rate compounded continously

For the four following questions, assume you need $1 million as an ending balance in your account on January 1, 2010.

- To achieve your goal, how much would you need to deposit on January 1, 2001 into a savings account paying 8.25 percent, compounded annually?

- If you had $472,750 on January 1, 2001, what nominal interest rate, compounded daily, would you have to earn to have the necessary $1,000,000 on January 1, 2010?

- Assume that to help you achieve $1,000,000 goal, a benefactor gives you $250,000 on January 1, 2001. You will then make 6 equal additional deposits on each June 30, 2001 through 2003 and on each January 1, 2002 through 2004. If all of this money is deposited in a bank account that pays 9 percent p.a., compounded semin-annually, how large must your deposits be?

- Compute the future value at the end of year 32 of a $250 deposited every month for 32 years (with the first deposit made one month from today) into an account that pays 8 percent p.a.

Thanks so much

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