FIN 419 Week 3 Problems Essays - Mathematical Finance, Loans

FIN 419 Week 3 Problems Essays - Mathematical Finance, Loans Problem 1-A $85,000.00 Future Value: $873,260.59 9%FV 30$873,260.59 PV(D2,D3,D1) Interest:9% Answer Years:35Future Value:$42,777.60 PV(B4,B6,0,B2,0) Problem 1-B Present Value$85,000.00 Interest:11% Answer Years:30Future Value:$738,972.37 PV(B10,B12,B8) Problem 1-C If rates were to raise the amounts needed for the 35 year period prior to retiring would lower. Increasing the interest rate increases the future value of the investment causing a lesser amount to be required. Problem 2-A YearAmountPresnt Value FactorPresent Value 1 $7,000.00 0.9345794391/(1+A19)^B24 $6,542.06 B19*D19 2 $4,000.00 0.9259797991/(1+A20)^B24 $3,703.92 B20*D20 3 $8,000.00 0.9075191551/(1+A21)^B24 $7,260.15 B21*D21 4 $10,000.00 0.8934537991/(1+A22)^B24 $8,934.54 B22*D22 5 $13,000.00 0.8821235421/(1+A23)^B24 $11,467.61 B23*D23 Rate7%Total (Answer) $37,908.27 Problem 2-B When the earning rate increases the total amount decreases. As the rate increases so does the interest earned toward the investment. The larger your rate is the lower your present value will need to be to cover your future value shortfall Problem 3-A Amount: $(25,000.00)$10,768.29 PMT(B31,B32,B30)End of Year Loan Payment Annual Interest:14%Answer Years:3 Payments:3 Problem 3-B Please see attached excel spreadsheet for Loan Amortization Schedule Problem 3-C As the principal amount is paid onto a loan the interest amount decreases. This is because interest is determined based on present balance. Problem 4-A To start we are putting $500 down on a $6,500 loan, which leaves $6,000 Loan: $(6,000.00) Annual Rate:14% Years:2Answer Payments:24Monthly Payment:$288.08 PMT(B43/12,B45,B42) Total:$6,913.86 E45*B45 Problem 4-B Again, to start we are putting $500 down on a $6,500 loan, which leaves $6,000 Loan: $(6,000.00) Annual Rate:9% Years:2Answer Payments:24Monthly Payment:$274.11 PMT(B49/12,B45,B48) Total$6,578.60 E52*B52