PART 1: INTRODUCTION
P3-32 You plan to start saving for your son’s university education. He will begin university when he turns
18 and will need $4,000 then and in each of the following three years. You will make a deposit at
the end of this year in an account that pays 6% compounded annually and an identical deposit
at the end of each year, with the last deposit occurring when he turns 18. If an annual deposit of
$1,484 will allow you to reach your goal, how old is your son now?mini caseCasino.com Corporation is building a $25-million office
building in Adelaide, and is financing the construction at
an 80% loan-to-value ratio, where the loan is in the amount
of $20,000,000. This loan has a 10-year maturity, calls for
monthly payments, and has a stated annual interest rate
of 8%.ASSIGNMENT
Using the above information, answer the following questions.
1 What is the monthly payment?
2 How much of the first payment is interest?3 How much of the first payment is principal?
4 How much will Casino.com Corporation owe on this
loan after making monthly payments for three years (the
amount owed immediately after the 36th payment)?5 Should this loan be refinanced after three years with
a new seven-year 7% loan, if the cost to refinance is
$250,000? To make this decision, calculate the new loan
payments and then the present value of the difference in
the loan payments.
6 Returning to the original 10-year 8% loan, how much is
the loan payment if these payments are quarterly rather
than monthly?
7 For this loan with quarterly payments, how much will
Casino.com Corporation owe on this loan after making
quarterly payments for three years (the amount owed
immediately after the twelfth payment)?
8 What is the annual percentage rate on the original
10-year 8% loan?9 What is the effective annual rate (EAR) on the original
10-year 8% loan?PRESENT VALUE
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