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Questions CH 4

1) This document contains calculations for various investment scenarios including stock and bond investments, annuities, leasing vs purchasing, and mortgage calculations. 2) Key results include the future value of a $850 monthly stock investment and $350 monthly bond investment over 30 years being $2,272,995, and the monthly withdrawal amount after retirement being $16,065. 3) For a $7,300 annual annuity starting in year 3, the present value in the second year is calculated as $82,286.96. 4) Leasing costs of $2,400 plus $580 monthly are calculated to have a present value of $21,465.19, while purchasing has a present value

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19 views

Questions CH 4

1) This document contains calculations for various investment scenarios including stock and bond investments, annuities, leasing vs purchasing, and mortgage calculations. 2) Key results include the future value of a $850 monthly stock investment and $350 monthly bond investment over 30 years being $2,272,995, and the monthly withdrawal amount after retirement being $16,065. 3) For a $7,300 annual annuity starting in year 3, the present value in the second year is calculated as $82,286.96. 4) Leasing costs of $2,400 plus $580 monthly are calculated to have a present value of $21,465.19, while purchasing has a present value

Uploaded by

shilpa gupta
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as XLSX, PDF, TXT or read online on Scribd
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Investment Interest

23 $850. per month 10% FV


$350 6%
Stock Bond
Future Value {850*(1+ 0.1/12)^360-1}/0.1/12 {350*(1+06/12)^360-1}/0.6/12
1921414.736 351580.2649
Total amount saved 2272995.0009

After retirement,PV C{1-(1/(1+r)^t/r}


C= 2272995.0009/{1-1/(1+.07/12^25*12}/.07/12
$160650 Withdrawl per month

28 Annuity $7300 per year


Payment made at year 3
PV C{1-(1/(1+r)^t/r}
T 23 28
PV 7300{1-1/1.07^23}/.07
PV in 2nd year $82286.96 88600.91

Now PV current year considering 2nd year as FV

PV FV/(1+R)^T
82286.96/1.07^2
PV $71872.61

58 PV for leasing 2400 + 580{(1-1/(1+0.06/12)^12*3}/0.6/12


$21465.189
PV resale price 22000/[1+(0.06/12)]^36
$18384.18
FV

Difference between
PV for purchacurrent & PV resale 37000-18384.18
18615.8

Buy is the best option as its PV is less than leasing

For breakeven PV OF RESALE AND BUYING SHOULD BE SAME


PV 37000-pv 21465.189
pv 15534.811
FV C[(1+r)^T-1}/r
FV 15534.811(1+0.06/12)^3*12 18590

29
PV C{1-(1/(1+r)^t/r}

750*{1-(1/1+r)^t/r}

PV at year 5 750* { 1 - 1/1.11^10/.11}

4416.92
pv today FV/(1+R)^T

4416.92/1+.08^5

pv today 3006.08

30 r 5.4/12 = 0.45
Downpayment 725000*20% = 145000
principal, pv 580000
T 30*12
PV C{1-(1/(1+r)^t/r}
580000 C{ 1- 1/(1+.0045)^360/0.0045

C 3256.87

AFTER 8 YEARS
T 22*12

PV 3256.87{1- (1/1+0.0045)^264/0.0045
PV 502539.547

54 A)
First payment
delivered today 250000
tax 28%
pv 250000(1-.28)
180000

PV 180000 + 180000 (1-1/(1+.0585)^30/0.0585


2697950.157

B)
BALANCE YEARS C 200000(1-.28)
144000

PV 530000+144000(1-1/(1+.0585)^30/0.0585

2544360.126
OPTION A is better
C[(1+r)^T-1}/r

^360-1}/0.6/12

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