This can be worked in a computational software package like Excel or MatLab, or worked by hand and scanned. In any case, neatness and clarity count. Show your work. Upload your solution to Canvas by the deadline.
1. If you invest $10,000 in a bond that pays 4% annually,
a. How much will your investment be worth in 15 years? You will not withdraw any money from the investment during the 15 year term.
b. If your discount rate for this investment is 5%, what is the opportunity cost of purchasing the bond? Express your answer as a present value and future value.
2. If you take out a $350,000,15 year mortgage for a house that has an annual interest rate of 6.0%,
a. What will your monthly payment be?
b. What will be the total cost of financing if you pay off the loan as scheduled?
c. If you make your required payments each month then win the lottery at the end of year 10, what would it cost you to pay off the house immediately at that point?
P = Present Value
F = Future Value
A = Periodic Value
i = Discount Rate
n = Number of periods