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Category: Homework
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# a. If you invest \$9,000 today, how much will you have in

### Resolved Question:

a. If you invest \$9,000 today, how much will you have in:
3 years @ 7%
8 years @ 10%
30 years @ 15%
30 years @ 15% compounded semi-annually

b. What is the present value of:
\$10,000 in 9 years at 8%
\$10,000 in 9 years at 9%
\$10,000 in 12 years at 10%
\$10,000 in 15 years at 11%

c. Your aunt offers you a choice: \$25,000 in 50 years or \$95 today?
If money is discounted at 12%, which should you choose?

d. Your aunt offers you a choice: \$30,000 in 25 years or \$850 today?
If money is discounted at 11%, which should you choose?
Submitted: 7 years ago.
Category: Homework
Expert:  SteveS replied 7 years ago.

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Customer: replied 7 years ago.

Hi,

I am sorry but I still do not understand. Can you please plug the numbers into the formula you have provided and maybe that will help because I will see it like in a mathematical format. Thank you for your help in advance.

Future Value = principal*(1+interest rate per period)^(# XXXXX)

Customer: replied 7 years ago.

Hi,

Also, can you help me with this?

Midland Chemical Co. is negotiating a loan from Manhattan Bank and Trust. The small chemical company will need to borrow \$400,000.The bank offers the following:Interest Rate 6.00%Compensating balance requirement20%or as an alternative.Interest Rate 10.00%Additional bank fees \$5,500In either case the rate on the loan is floating (changes as the primerate changes), and the loan would be for one year.a.Which loan carries the lower effective rate?Consider fees to be the equivalent of other interest.b.If the loan with the 20% compensating balance were to be paid off in 12 monthly payments, what would the effective rate be?(Principal equals amount borrowed minus compensating balance.c.Because the interest rate on the loans is floating, it can go up as interest rates go up. Assume that the prime rate goes up by 2%and the quoted rate on the loan goes up by the same amount.What would then be the effective rate on the loan with compensating balances?Convert the interest rate to dollars as the first step in your calculation.

Thank you